Consolidated Financial Highlights · reciprocating pump manufacturer in Germany, as well as alliances in the hemodialysis business with the Weigao Group, a medical consumable manufacturer

Consolidated Financial Highlights 01

Message from the President 02

Special FeatureToward Achieving the Goals of Our Five-Year Business Plan 04

Global Strategies and Topics 06

Business at a Glance 08

Segment Information 10

Research and Development 16

Corporate Social Responsibility 19

Nikkiso Group Network 24

Corporate Governance 26

Management’s Discussion and Analysis 28

Financial SectionConsolidated Balance Sheet 32

Consolidated Statement of Income 34

Consolidated Statement of Changes in Equity 35

Consolidated Statement of Cash Flows 36

Notes to Consolidated Financial Statements 37

Independent Auditor’s Report 64

Board of Directors and Auditors 65

Executive Officers 65

Corporate Data 65

Global Network 66

Since its foundation in 1953, Nikkiso Co., Ltd.,

has been consistently perceptive to customers’

needs and has offered solutions with its

original technologies.

The Nikkiso Group has provided a host

of products worldwide based on its core fluid

control technology expertise. This expertise

includes industrial pumps and systems, water

conditioning systems for thermal and nuclear

power plants, precision equipment products,

carbon fiber re-enforced products and medical

products. We will continue in our endeavors to

build a brighter future for relevant fields.

In recent years, we have recognized that

it is crucial for us to expand our business into

global markets for sustained business growth.

In addition to the overseas expansion of the

production and sales bases, we have carried

out a wide range of measures, including

the acquisition of LEWA GmbH, a global

reciprocating pump manufacturer in Germany,

as well as alliances in the hemodialysis

business with the Weigao Group, a medical

consumable manufacturer in China.

In April 2013, we launched the “Nikkiso

Vision 2018,” our five-year business plan.

We reaffirmed the importance of “Nikkiso

Technologies” and “Best Practice Models” to

exceed customer expectations. In addition, we

resolved to broaden and deepen our business

domain by developing new businesses.

Without losing our basic principles and

values–addressing customers’ needs and

providing efficient solutions and further

developing new markets–, we will set higher

goals and continually consider what needs to

be done and promptly carry out measures to

achieve those goals with dreams and passion.

NIKKISO Profile Contents

Consolidated Financial Highlights

Net Sales Net Income Total Assets/Equity Equity Ratio

ROE/ROA

’10 ’11 ’12 ’13 ’140

20,000

40,000

60,000

80,000

100,000

120,000

140,000

(Millions of Yen)

’10 ’11 ’12 ’13 ’140

1,000

2,000

3,000

4,000

5,000

6,000

7,000

(Millions of Yen)

’10 ’11 ’12 ’13 ’140

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

0

10

20

30

60

80

100

50

40

70

90

(Millions of Yen) (%)

Total Assets Equity Equity Ratio

’10 ’11 ’12 ’13 ’140

2

4

6

8

10

12

14

(%)

ROE ROA

Millions of YenThousands ofU.S. Dollars

2014 2013 2012 2011 2010 2014

Results of Operations

Net sales ¥121,549 ¥103,670 ¥90,138 ¥83,143 ¥78,020 $1,191,655

Gross profit 43,954 34,239 29,626 26,920 24,248 430,918

Operating income 9,424 7,482 6,581 5,399 5,663 92,388

Income before income taxes and minority interests

10,260 11,360 5,891 4,718 5,027 100,591

Net income 5,897 6,898 3,317 2,685 3,240 57,815

Financial Position

Total assets ¥161,284 ¥138,345 ¥118,235 ¥122,009 ¥115,131 $1,581,215

Inventories 21,695 19,371 16,282 14,638 13,861 212,699

Property, plant and equipment, net 27,057 19,611 18,934 19,051 20,677 265,258

Total liabilities 93,912 79,787 67,842 72,970 67,614 920,703

Equity 67,372 58,558 50,393 49,039 47,517 660,512

Yen U.S. Dollars

Per Share

Net income

Basic ¥76.46 ¥89.41 ¥42.47 ¥33.86 ¥47.49 $0.75

Diluted 70.78 89.40 0.69

Cash dividends applicable to the year 16.00 14.00 12.00 12.00 12.00 0.16

Equity 853.06 742.03 639.98 605.46 587.66 8.36

Notes: The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ￥102 to $1, the approximate rate of exchange at March 31, 2014.

NIKKISO CO., LTD. and its CONSOLIDATED SUBSIDIARIESFor the years ended March 31

1Annual Report 2014

Message from the President

We are making steady progress toward achieving the targets set in Nikkiso Vision 2018

The Nikkiso Group launched its five-year business

plan, the Nikkiso Vision 2018, in April 2013. The plan

emphasizes our continuing commitment to learning

and mobilizing the Nikkiso Group’s full resources and

capabilities to “address customers’ critical challenges,”

“provide the best solutions with our innovative

technologies” and “create value as the partner of

choice.” The three pillars of this plan are (i) to establish

Nikkiso technologies to be at the top level globally in

each field of its operations, (ii) to realize returns on

past investments and leverage them toward future

growth and (iii) to take advantage of the Nikkiso

Group’s strengths to develop new businesses. As well

as pursuing an increased scale of operations, we aim to

become a company with a wellspring of technological

capabilities that generates robust profits.

The fiscal year ended March 31, 2014, was the

inaugural year of the Nikkiso Vision 2018. During the

year, we planned and executed measures in numerous

areas of business. For example, we acquired Geveke

B.V. of the Netherlands and strengthened our business

foundations through the acquisition of a continuous

renal replacement therapy (CRRT) business.

Business Results for the Fiscal Year Ended March 31, 2014During the fiscal year ended March 31, 2014, the

Company posted orders of ¥122.3 billion, net sales of

¥121.5 billion, operating income of ¥9.4 billion and net

income of ¥5.8 billion. All categories were up year on

year except net income, which was affected by the

impact of an extraordinary gain on sales of the former

head office site in the preceding fiscal year.

Performance in the Industrial Business was

favorable, centering on the provision of components in

growth markets where we enjoy a high market share,

such as pumps for the energy sector and aircraft

components. In the Medical Business, domestic sales of

our mainstay dialysis-related products were favorable.

Performance Outlook for the Fiscal Year Ending March 31, 2015For the fiscal year ending March 31, 2015, we expect

¥135.0 billion in both orders and net sales, and we

forecast operating income of ¥10.0 billion and net

income of ¥6.0 billion.

In the Industrial Business, we anticipate solid

ongoing performance from LEWA and the Aerospace

Division. In the Medical Business, we expect sales of

dialysis monitoring machines in Japan to decrease due

to a downward reaction to the highest sales posted in

the previous fiscal year. Although look forward to the

positive impact of bringing the CRRT business within

the scope of consolidation, we expect profits from this

business to decrease from the previous year.

Aiming for Further GrowthGoing forward, we will continue our aggressive

business development efforts, centering on fields

where markets are expanding, such as energy,

aircraft and medical equipment. We will also work

steadily on measures such as the globalization of our

businesses and human resources, the development

of technologies and products to meet market needs

and the reinforcement of our quality control system.

Furthermore, in each area of business we will review

profitability by product and region and progress on

the drafting of plans designed specifically to enhance

earnings and profits dramatically. To ensure our ability

to provide all of our products stably and from the

standpoint of business continuity, in September 2012

we began transferring some production functions

from our Shizuoka Plant to our Kanazawa Plant. In

April 2014, we completed upgrades to the aircraft and

medical plants within the Kanazawa Plant. Next, we will

shift production, a transition we expect to complete by

the spring of 2015.

We believe that these initiatives will lead a robust

management structure and improved operating

performance. We would like to ask our shareholders

and investors for their continued support as we pursue

further growth.

July 2014

Toshihiko KaiPresident & Chief Executive Officer

2 3NIKKISO Co., Ltd. Annual Report 2014

Special Feature

Our Group decided in 2013 to proceed with commercial

production of ultraviolet (UV) LEDs. In November 2013, we

began construction of a new plant in the city of Hakusan,

Ishikawa Prefecture, to create a platform for initial

mass production of UV LEDs. In addition, we altered the

operational structure for UV LEDs, placing Nikkiso Giken

Co., Ltd. at the core, and are proceeding with full-scale

development of the business.

UV LEDs are not replacements for UV lamps, but rather

are used in sterilization, resin curing, adhesive solutions,

printing, testing and measurement, with efforts to develop

new applications activating the special characteristics of

LEDs under way in every industry. Our deep-UV LEDs in

Toward Achieving the Goals of Our Five-Year Business Plan

Three pillars for the next fi ve years

To reestablish “Nikkiso Technologies” and “Best Practice Models” to exceed customer expectations

To fully realize returns on past investments and leverage them to our future growth

To broaden and deepen our business domain by developing new businesses

We acquired Geveke B.V., a Dutch company, in July 2013.

Geveke was founded in 1874 and is engaged in the sale

of industrial-use pumps and compressors, and the design

and delivery of integrated pump and compressor system

packages.

Through the acquisition of Geveke, we can fuse our

Group’s pump technologies with Geveke’s system design,

making it possible to engage in the advanced solutions

business. The move also allows us to diversify our products

and services through the addition to our product lineup of

compressor integration technologies not currently handled

by the Nikkiso Group.

Another of Geveke’s great strengths lies in the close

relationships it has built with the oil majors and other oil

The decision to acquire American fi rm Baxter International

Inc.’s continuous renal replacement therapy (CRRT) business

was made in July 2013, and the acquisition was fi nalized

in January of this year. We are currently engaged in

strengthening the sales structure, as well as facets of our

operational structure such as the supply chain and IT systems,

with the goal of full-scale global development of this business

as a strong revenue source.

CRRT is a therapy used primarily for patients in an

operating room or intensive care unit suffering from acute

kidney failure to replace kidney function by purifying the

blood continuously for several days.

Our Group has been developing and manufacturing

CRRT devices at Nikkiso Europe GmbH, our German

subsidiary, and supplying these under OEM agreements to

development leaders as a

company well-versed in

plant design concepts and

quality standards. We aim

to put Geveke’s customer

base to use in expanding

opportunities for business with the oil majors and others.

We anticipate growth in energy-related development

investment in the industrial sector against a backdrop of

greater energy demand worldwide due to economic growth,

mainly in emerging markets. We are proceeding to unite

the LEWA, Geveke and Nikkiso technical and sales forces to

build a globally based structure for optimal development,

production, sales and after-sales services.

Acquisition of Geveke B.V. of the Netherlands

Topics during the Inaugural Year of Nikkiso Vision 2018

Baxter International. This acquisition marks

our participation in the CRRT sector backed

up by a full lineup of disposables, dialysate

and other products.

The therapeutic goal of CRRT, the

purifi cation of the blood of patients

suffering kidney failure, is the same as that

of our main business, chronic hemodialysis,

and the disposables used in these therapies,

such as devices, fi lters and blood tubing,

have many aspects in common, such as

product characteristics and production

technologies. We will aim to create synergistic effects with

hemodialysis through our entry into the CRRT business as

we engage in the strengthening of our medical business.

Acquisition of CRRT Business from Baxter

Decision to Proceed with UV LED Productionthe short

wavelength

spectrum

(from 360

nm) have the highest level of output and life span on a

mass production basis, and are gaining interest for being

practical as well as highly functional. Efforts are under way

to establish a full-scale mass production structure that will

make us a world leader in this fi eld.

We will continue to develop new businesses through the

penetration of the market by our LED products, develop and

offer applications geared toward our customers’ new product

applications and make efforts to create new markets.

To achieve the fi ve-year business plan objectives

outlined above, we will need to address a variety of

issues in each of our business segments.

In the Industrial Division, we will need to

thoroughly review our earnings structure in the areas

of pumps for the Japanese petrochemical industry and

for use in power plants, as well as system products. We

will reinforce our after-sales service structure, including

overseas, and diversify LEWA’s sales routes, which

currently rely heavily on pumps for the energy sector.

Business in the Aerospace Division is expanding

rapidly. Against this backdrop, we need to cultivate

additional engineers and other human resources.

We also recognize the need to create development,

production and quality control systems that are

balanced among our domestic plants—the Shizuoka and

Kanazawa plants—and our Hanoi plant in Vietnam.

In the Medical Division, we see the need to augment

our sales in overseas markets and reinforce profi tability.

We also need to set up a management structure

and develop new products in the CRRT business.

Furthermore, we will need to develop products in new

domains that have the potential to become our next

major pillar of business to follow hemodialysis.

In our UV LED business, we need to collaborate with

customers in creating new markets and make steady

progress on establishing a structure to supply products

in a stable manner.

Issues for the Company as a whole include the

need to make a thorough review of Group systems and

structures that serve as our management foundation.

We need to put in place organizational structures

and human resource and IT environments that will

support operational expansion and an increasingly

global management environment, as well as reinforce

our fi nancial structure. We will remain fi rmly focused

on compliance as we follow through with initiatives to

fulfi ll our corporate social responsibility.

By making steady progress on these initiatives, we

aim to meet the targets we have set for fi scal 2017, the

fi nal year of the Nikkiso Vision 2018. These are net sales of

¥150.0 billion and an operating margin of 9%.

The Group’s Medium- to Long-Term Management Strategy

1

2

3

Net Sales

Operating Income (Millions of Yen）

2009Years to March 31

2010 2011 2012 2013 2014 2015(estimate)

2018(target)

Nikkiso Vision 2018

Net Sales ¥150Billion

Operating Margin 9％

Target for the fiscal year ending March 31, 2018

72,39578,020

83,14390,138

103,670

121,548

135,000

4,771

5,663 5,399

6,581

7,482

9,4239,42310,00010,000

Pump Package

SMD Package TO-CAN Package

CRRT Device

1

2

3

The Nikkiso Group launched its fi ve-year business plan, the Nikkiso

Vision 2018, in April 2013. The plan emphasizes our continuing

commitment to learning and mobilizing the Nikkiso Group’s full

resources and capabilities to (i) address customers’ critical challenges,

(ii) provide the best solutions with our innovative technologies and

(iii) create value as the partner of choice.


ERICASERICASERICASEER CCAASAMAAAAMShanghai Nikkiso Trading Corporation

Netherlands

United States

Germany

Vietnam

Japan Japan

Worldwide

ChinaThailand

Global Strategies and Topics

We acquired Geveke B.V., a Dutch

company, in July 2013.

We established our global business strategy

headquarters for cryogenic pumps at Nikkiso

Cryo, Inc., in the United States in response

to expanding demand for LNG in overseas

markets. We are reconstructing a global organization to consolidate

development, production, testing and sales.

Against the backdrop of ongoing

energy-related investments at

locations throughout the world,

orders for and sales of pumps and

systems remained strong, centering

on equipment for crude oil and

natural gas production. In response

to these solid orders, we focused on

augmenting production capacity at LEWA.

We have received new orders,

in keeping with growing demand

for the use of CFRP in aerospace

parts. We are working to expand

production capacity at our plant in

Hanoi, Vietnam.

The Group decided in 2013 to proceed with commercial

production of ultraviolet (UV) LEDs. In November 2013, we began

construction of a new plant and altered the operational structure

for UV LEDs, placing Nikkiso Giken Co., Ltd. at the core, and are

proceeding with full-scale development of the business.

We are transferring function of medical equipment and

aircraft from the Shizuoka Plant to the Kanazawa Plant.

We fi nalized the acquisition of U.S. fi rm

Baxter International Inc.’s continuous renal

replacement therapy (CRRT) business in

January 2014.

The manufacturing and maintenance

of hemodialysis machines are moving

ahead smoothly at Weigao Nikkiso

(Weihai) Dialysis Equipment Co., Ltd.,

a local joint venture. We intend to

increase sales through our cooperation

with the Weigao Group.

In response to strong

growth in sales of blood

tubing lines in Japan,

M.E. Nikkiso Co., Ltd., is

reinforcing its production

capacity in this area.

Acquisition of Geveke B.V. of the Netherlands Reinforcing Our

Production System for Cryogenic Pumps

LEWA GmbH Augments Production Capacity

Expanding Our Aerospace Factory in Hanoi

Decision to Proceed with UV LED Production

Relocation of Plants in Japan as Part of Our Business Continuity Plan

Acquisition of CRRT Business from Baxter

Strengthening Our Business Structure with a View to Full-Fledged Expansion of the Hemodialysis Business

Reinforcing Production Capacity for Blood Tubing Lines

NIKKISO GROUP

LEWA GROUP

For details P. 5

For details P. 5

For details P. 5For details P. 21

Nikkiso Europe GmbH

Nikkiso-KSB GmbH

Nikkiso Pumps Korea Ltd.

Shanghai Nikkiso Non-Seal Pump Co., Ltd.

Nikkiso Vietnam MFG Co., Ltd.

Microtrac, Inc.

Nikkiso America, Inc.

Geveke B.V.

Nikkiso Cryo, Inc.

Nikkiso Vietnam, Inc.

LEWA GmbH

M.E. Nikkiso Co., Ltd.

Weigao Nikkiso (Weihai) Dialysis Equipment Co., Ltd.

Taiwan Nikkiso Co., Ltd.


Industrial Division

49.9%

¥ 60,636million

Medical Division

43.6%

¥ 52,960million

Aerospace Division

6.5%

¥ 7,947million

Manufacture, sales and consulting for

carbon fi ber reinforced plastic products,

such as aircraft components.

Share of Net Sales

Business at a Glance

Aerospace Division

Industrial Division

Medical Division Manufacture, sales and after-sales service of

dialysis machines and other medical equipment and

pharmaceutical products.

Manufacture, sales and after-sales service for industrial

products, including special pumps, water conditioning

systems and precision equipment.


Introduction of Major Products

Industrial DivisionLeading the world with creative

technologies, Nikkiso provides

optimal solutions.

Segment Information

◀Reciprocating pumpsReciprocating pumps supply fl uids to processes with high precision. These are available in various models, such as diaphragm types, which ensure no leakage, and ground packing types, as well. This series covers a broad range of pump discharge pressures.

◀Cryogenic submerged motor pumpsThese pumps transport cryogenic liquefi ed gases, such as LNG and LPG. They are available in different models, such as those installed in storage tanks, out of which the pump can be pulled; ones installed in separate pots and a fi xed type installed in tankers.

◀Canned motor pumpsThe pump and motor are integrated in a sealless unit, with no shaft seal (i.e., no mechanical seal); this is ideal for liquids that require no-leakage pumping.

▶EcoPrimeThis liquid chromatography system covers a range of applications and is suited to projects being scaled up from the lab, pilot plants and actual production lines. Employing globally state-of-the art pump control technology, the system has a smaller pulse than conventional three headed pump systems, providing less-impact to the media fi lled in the column.

▶Pump systemsWe are proactive in sales of not only individual pumps but also pump packages combined with components and equipment.

Energy Related Products Other Products

Development/Mining Distribution Consumption

Reciprocating pumps▼

▶Automated water conditioning systems for power generation plantsThese systems automatically process water to maintain water quality levels using our sampling and chemical feed systems. We design process control networks between our systems in line with a power plant’s operating procedures.

◀Microtrac particle size analyzersThese devices measure the physical characteristics of powders and granules (such as particle

diameter, zeta potential and surface measurements of particles with different geometries). The Microtrac series of particle size analyzers, which uses lasers to measure the size of powder granules, was fi rst introduced in Japan in 1979. Since that time, the series has maintained the top share of the domestic market and earned a strong reputation from customers.

▶Electronic component manufacturing systemsNikkiso provides manufacturing and production systems for the global electronic components industry. The picture at right shows what is known as a warm isostatic press (WIP). The warm laminating system is a global standard for sheet lamination of high-quality multilayer ceramic electronic components such as MLCC, MLCI, LTCC, HTCC, MCM, PZT, fi lters and varistors.

Precision Equipment

Through our innovative technologies, the Nikkiso Group

plays a key role from R&D through production and

quality control for our customers. We cater to the needs

of our customers in rapidly changing industries such as

electronics, healthcare and the environment; the Nikkiso

Group is capable of satisfying the requirements of clients.

For example, multilayer ceramic electronic

components are utilized and essential for smartphones,

tablets and computers. These components can benefi t

from our warm isostatic laminating systems and

related equipment to improve production effi ciency.

Our Particle Size Distribution, Specifi c Surface Area/

Pore Size Distribution and Image Analyzers characterize

a sample’s particles to help develop new medicines,

batteries and others. These products are targeted as a

“Solution Tool” for problems our customers may face.

Pumps and Systems

With more than a half-century of expertise in

fl uid and water conditioning technologies, we are

continuously taking up new product challenges.

Our specialty is pumps that operate reliably

in harsh environments of extremely high or low

temperatures and high pressure. They include non-

seal pumps with an integrated pump and motor for

leak-free transport of hazardous liquids, ecofl ow

pumps that inject chemicals with high accuracy,

and cryogenic pumps for transporting super-low-

temperature liquefi ed natural gas (LNG).

Since developing Japan’s fi rst boiler water

treatment systems for thermal power plants,

we have been contributing to the stable supply

of electric energy, which has become nowadays

indispensable to our society. We are also working

to solve various water and environmental problems by

developing new water conditioning systems for power

plants and wastewater treatment systems, with our

advanced technologies and know-how applied.

Most of Nikkiso’s customers are world-leading

petrochemical, energy and engineering contractors.

While responding to the issues faced by each

individual client and to overall high-level client

demands, Nikkiso also boldly takes on the challenge

of developing products capable of handling special

conditions. Renowned for a long history of building

up its manufacturing, sales, service and maintenance

operation structures, Nikkiso is well known around the

world as a global equipment supplier.


Jet Engine

Bypass air

Moving Direction

Bypass air

Torque Boxes32

1

Cascades

Blocker Doors


Cascades are the components of the thrust reversers

provided for commercial aircraft to control engine

airfl ow during landing. Approximately a quarter of a

century ago, the Aerospace Division produced the fi rst

cascades made of CFRP (carbon fi ber reinforced plastic).

Using CFRP cascades, we were able to reduce the

component weight by two-thirds without compromising

the strength and durability previously provided by

metal, thereby improving fuel effi ciency.

Nowadays, Nikkiso composite cascades have gained

worldwide recognition for superb qualities in advanced

design, analysis, curing, manufacturing techniques, and

quality control. The majority of commercial aircraft

manufacturers choose our products, including Boeing

and Airbus.

Other than cascades, our CFRP products have also

been applied to the main wings in components like

Aerospace DivisionStrength, Light Weight, Durability…

We are ready to meet the highly complex

demands of aircraft manufacturers, with

our original technologies to fully utilize the

advantage of CFRP.

Torque Boxes32 Cascades1 Blocker Doors

Segment Information

for thrust reversers

Thrust reversers are attached to

the engines of commercial jet liners

to control the engine airflow while

landing. Cascades are built in the thrust

reverser working as airflow deflectors.

We supply these products worldwide

for most commercial aircraft.

for thrust reversers

Blocker Doors are also built

in the thrust reverser. They

produce reverse thrust by

blocking the airfl ow and

diverting through the cascades.

Torque Boxes provide the structure

that supports the fan cowl and

cascade, bearing the load during the

reverser operation. It is an important

part that holds together the other key

components within the engine nacelle.

In order to minimize the breaking distance and make safe landing for commercial

airplane, they make the operation called “thrust reversing” at landing on the landing

fi eld. To reverse the thrust, the Blocker Doors will stop the bypass fl ow coming from

forward to the aft in the engine. And the Cascades will blow out the refl ected fl ow

to the forward direction. Thrust reversers maintain the same performance levels

even in severe weather circumstances such as rain, ice or snow.

Thrust ReverserMechanisms

At landing on ground

ailerons Cascade Certifi cates of appreciation from

clients (wing fl aps) and shrouds (wing covers).

Furthermore, Nikkiso is expanding their product line

range within the commercial aircraft component fi eld,

such as the Blocker Doors and Torque Boxes for thrust

reversers. To support this growing business, Nikkiso

has also established a subsidiary company in Vietnam

(Nikkiso Vietnam Inc. (NVI)) to produce high quality

products with a competitive price.

In the space industry, our products are used to build

satellite components. In addition, our technologies are

applied to the general industries, such as components

used in liquid crystal panel manufacturing.

With our technologies and manufacturing knowledge

acquired in our work with the aerospace industry, we

hope to support our customer to expand the sphere of

possibility.



As the pioneer of the hemodialysis machine in Japan,

Nikkiso Medical Division continues to improve dialysis

medical care and patient QOL.

The state-of-the-art computerized hemodialysis

machine, data communication systems, powder

dialysate, the powder dialysate dissolving device

and a multi-patient dialysate supply system were all

developed to allow medical professionals to reduce

workload and spend more time on patient care.

Furthermore, Nikkiso works to develop and securely

supply disposable products (and supplies) such as a

dialyzer that uses Nikkiso original PEPA membranes

and blood tubing lines standardized for easier use. We

take “pride and responsibility” for our business, which

involves human lives. A reliable after-sales service

system is provided for our products, because they

are used in the medical fi eld where mistakes are not

tolerated.

In addition to engineer developing in Nikkiso Group,

we provide customers with preliminary services and

the latest instructional courses.

Our goal as a comprehensive manufacturer of

dialysis products is to build and maintain the trust,

relief and reliability of our customers, and to provide

a comfortable treatment environment for people who

need dialysis.

Medical Division Our sophisticated technologies and fi ne

maintenance systems offer reliability and

trust. Our goal as a comprehensive dialysis

manufacturer is to improve patient QOL.

Other products

Hemodialysis Allied Products

Japan

▶ Machines ▶ Disposable products

Overseas

Apheresis system Blood glucose controller

Segment Information

RO device Dissolving equipment

Dialysate supply device

Hemodialysis machine

Dialysis monitoring equipment

Hemodialysis machine

Blood tubing lineDialyzer Powderdialysate

Central monitoring system

Characteristics of Dialysis Treatment in JapanDialysis treatment in Japan typically involves the use of a “central dialysis fl uid delivery system” to supply dialysate. Dialysate is prepared in the preparation room and supplied to the dialysis console unit. As dialysate is prepared all at once, treatment is effi cient and stable. Overseas, however, dialysis individual use is typically used for dialysis treatment, and dialysate is prepared by each machine. This approach allows for a broad range of dialysis treatment, as dialysate can be prepared to meet individual patient needs.


Chemical and petrochemical plants use a variety

of liquid chemicals, and pumps having a leak-free

structure are essential to prevent these chemicals

from affecting people and the environment, as well

as for keeping dangerous chemicals from exploding

during handling.

To address this need, Nikkiso has developed

pumps with a physical leak-free structure that

integrates the pump and motor into a can. We are

planning to introduce a canned motor pump featuring

leading-edge design that we have developed jointly

with KSB of Germany. Also, we offer pumps that

circulate some of the liquid they are handling into the

pump area for cooling, as well as electrical monitors

Liquefi ed natural gas (LNG) is transported to

consuming area by LNG tankers with cryogenic

condition of -162˚C. So the dimensional problem

arises on pump’s material due to contraction by the

large temperature difference between pumped liquid

and ambient.

Our long year experience and leading-edge

analysis technique have enabled us to design

products used in cryogenic application, and precision

machining technologies reaching micron meter

accuracy contributes to manufacture high quality

LNG pumps.

Recent years have seen a shift from oil fi eld production on

land to the ocean. The limited space on drilling platforms at

the ocean surface has prompted the need for the effi cient

incorporation of various space-saving functions. This need

extends to the pumps.

LEWA employs technology that uses a spring to

control diaphragm location and proprietary technology

such as a layered two-diaphragm confi guration to detect

membrane damage.

These technologies

enable LEWA to offer

high-pressure, high

accuracy and leakproof

pumping that meet

high-performance

requirement and space

saving demand.

Boiler water of thermal and nuclear power plants is

heated to generate steam, which is used to rotate turbines

and generate electricity. However, changes in the quality

of water inside the boilers may cause turbine and boiler

to corrode, which will reduce generation effi ciency and

corrupt boiler heat exchange tubes. For these reasons,

maintaining appropriate water quality is essential.

To determine the quality of boiler-turbine steam and

water, continuous sampling at high temperatures

and pressures with sampling systems that incorporate

temperature- and pressure-reducing equipment and

various analyzers to monitor water quality, as well as

chemical dosing systems that employ high-pressure

metering pumps to inject appropriate amounts of

chemicals into boilers operating at high temperatures

and pressures is essential. We provide these systems as

integrated water quality control system, which are fl exibly

tailored to match different power plants’ water quality

and design specifi cations, contribute to the stable and

effi cient operation of power plants.

Particle Characteristic Evaluation at the R&D

and Quality Control is a key technology in

the wide range of application from foods

and pharmaceuticals to building materials,

inks and other manufactured items. Most

of end products in these industries are

produced by particles or powder form of raw

materials and the quality of the end products

is greatly affected by the characteristics of

raw materials. Therefore the characteristic

evaluation of particles such as Particle Size

Distribution, Particle Shape, Specifi c Surface

Area, and Pore Size Distribution is becoming

more and more important in every industry

and academics.

"Microtrac" and "BEL", the brand of Nikkiso

group for particle characterization, are

contributing in the wide range of industries and

academics by cutting edge technologies of Laser

Diffraction, Image Analysis and Gas Adsorption.

Research and Development

Nikkiso Developing Technologies to Meet Customers’ Needs Reestablishing “Nikkiso Technologies” is one pillar of the Company’s fi ve-year business plan for becoming

a global technology leader in each of the domains in which it operates. We are making a diligent effort to

address the issues and resolve the problems our clients face, pursuing product development and technological

innovation on a daily basis. Below is an overview of our businesses in different markets, our customers’ issues

and the technological developments we are pursuing to address them.

Leak-Free Structures

Cryogenic Technologies

Highly Functional and Space Saving

Water Conditioning Systems for Power Generation Plants

Cutting edge technology for Particle Characterization

Pump Technology

In recent years, owing to shorter

construction periods and rising local

labor costs, it has become commonplace

to assemble units on site. In addition to

supplying pumps on their own, customers

are calling for the packaging technologies.

To meet these customer needs,

LEWA has added to its own

accumulated expertise in proprietary

packaging technologies for the space-

saving design and manufacture of pumps,

piping, liquid chemical tanks, controls

and other peripheral equipment to fi t

limited spaces. By leveraging Geveke’s

technologies, LEWA expects to provide

customers with even higher-quality

engineering capabilities.

that monitor wearing status of bearing and time to

replacement since bearing condition is not visible

from outside. Through proprietary developments

such as these, we contribute to the increased

convenience of our customers.

In recent years, we have experienced an increase

of projects of offshore fl oating liquefaction (LNG

production) and re-gasifi cation (LNG consumption)

facilities. Waves and storms may cause pitching

and/or rolling to this kind of facilities. Accordingly it

requires the pumps those are able to handle liquefi ed

gas safely under swinging motion.

We have developed unique technologies to

relieve stress on the pumps both of under

operation and in static condition. It secures stable

pumping of vessel mounted pumps, preventing

damage from natural effect and extending life

expectancy of equipment.


Corporate Social Responsibility

12

3

5

6

Dialysis Equipment Recycling System

Through the introduction of an environmental management system and its foundation

activities, Nikkiso is involved in a variety of social contribution efforts. In March 1998,

we announced the Nikkiso Environmental Declaration, and our efforts to contribute to

a recycling-oriented society include development and production designed to lower

greenhouse gas emissions and protect the global environment.

We are working to reduce our environmental impact and lighten the burden of waste-processing activities.

Under this system, we conclude commissioned

industrial waste disposal agreements with

customers so that when they dispose of Nikkiso

dialysis equipment after use, we collect and

dismantle this equipment, reusing parts and

recycling, as appropriate. This approach eliminates

the need for customers to issue and manage

industrial waste manifests. Nikkiso is pursuing

this system as one of its efforts to contribute to a

recycling-oriented society.

Recycling fl ow ▶Used dialysis equipment is collected for disassembly and separation at a disassembly center. Iron, aluminum, copper and other resources are recycled.

Customer

Specifi ed transport company

Disassembly center

Recycling company

74

In March 1998, we announced the Nikkiso Environmental Declaration as part of our stance as a corporation that contributes to an environment-friendly society.

Activity completion notice

Collection request

Commissioned waste processing agreement

Direction to collect

Collection

Environmental Endeavors

Philosophy

Nikkiso’s corporate philosophy is

to contribute to the world using its

proprietary technologies, focusing on

“human life” and “environment.” Modern-

day society is in a stage of transition,

seeking both harmony with nature and

sustainable development. Nikkiso aims to

grow and develop with society and offer

technologies, products and services to

help realize these objectives.

Environmental Management Systems (ISO 14001)

To develop its environmental management systems, Nikkiso has

adopted a process that involves studying the environmental aspects

of its operations, identifying any operations with a signifi cant impact

on the environment, formulating and implementing environmental

management plans, and carrying out reviews by management. All our

domestic production bases (Higashimurayama Plant, Shizuoka Plant

and Kanazawa Plant) have gained ISO 14001 accreditation through the

U.K.’s Bureau Veritas Certifi cation (formerly BVQI). In the future, we will

strive to make ongoing improvements to environmental conservation

and pollution prevention.

Research and Development

Under the circumstances of ongoing high price of

the jet fuel, it is becoming more important and a

key of success for a new commercial airplane what

their fuel effi ciency is. In order to achieve better

fuel effi ciency, airframers have been looking for

new engine options, and more parts to be made

with lighter material including CFRP (Carbon Fiber

Reinforced Plastics). Meanwhile, CFRP is more

expensive than the metallic material, such as

Aluminum and Titanium. Also requires high skills

to maintain high quality and preciseness to meet

the requirement of the Aerospace industry. Nikkiso

is one of a few companies that comply with both

manufacturing skill and cost.

For the 30-years of experience, Nikkiso has

never stopped working on improving their

manufacturing methods, and maintained the high

performance in quality and delivery. Thus, the

composite Cascades which is the main product of

Aerospace Division, always has more than 90%

share in the market. Nikkiso also has the engineering

Medical institutions that perform hemodialysis face

a number of issues, including purifying dialysate,

reducing the operating burden on healthcare

staff, operating with reduced staff numbers and

responding to increasingly diverse treatment

methods.

In 1969, Nikkiso became the fi rst Japanese

company to succeed in the local production

of dialysis machines. Since that time, the Company

has striven to keep abreast with hemodialysis

developments in tandem with medical institutions.

Through these efforts, Nikkiso became the fi rst

company in the world to develop and commercialize

a duplex pump that offers highly precise control of

dialysate fl ow volume. This pump is used in the fl ow

rate control mechanism, which plays an important

role in dialysis machines. In addition to pursuing

propriety technologies such as these, we seek to

address the issues that medical institutions face in a

CFRP

Hemodialysis Treatment

capability and made proposal with the proper design

and shape, per each airplane, per each location of the

Cascade, considering the requirement of engineering,

such as limited weight, airfl ow and fl ow direction.

In year 2008, Aerospace Division established

their 100% subsidiary manufacturer in suburb

of Hanoi Vietnam, named Nikkiso Vietnam, Inc. (NVI).

Nikkiso transferred some work package from Shizuoka

to NVI. But NVI was also awarded with multiple new

programs as a result of customer’s evaluation towards

our business management. NVI enables to continue

offering high quality level while remaining unaffected

by the exchange rate fl uctuations, achieving

competitive price.

And Nikkiso supports

in respect to Design

and R&D from Japan.

With this structure,

the business inquiries

continue to increase in

a wider product range.

number of other ways. For example, we offer dialysis

monitoring machines, multi-patient dialysate supply

systems and powder dialysate, as well as a lineup of

dissolvers and other instruments that are required

for hemodialysis. We have also developed a dialysis

communication system that allows the monitoring of

multiple instruments.

In our mainstay area of dialysis monitoring

machines, we are introducing functions aimed

at enhancing monitoring of patients during treatment

and substantially reducing the labor required for

tasks such as pretreatment priming and post-

treatment restoration of blood fl ow. By introducing

original functionality to reduce the burden on

healthcare staff and contributing to treatment safety,

we are helping medical institutions to operate with

fewer people. Such developments have continued

to earn us high marks since our new product

introduction in 2012.


Environment-Related ProductsPumps and Systems

CFRP Product (Commercial Aircraft Parts)

Our line up of environmentally friendly products

employs specialized techniques to ensure zero leakage

during the transportation of substances used in the

industrial sector that are hazardous to the environment.

High-pressure process diaphragm pumps are used

for CO2 re-injection for LNG processing. Natural gas

contains a considerable amount of carbon dioxide and,

for industrial processing, the carbon dioxide must be

separated once and can be liquefied and re-injected

into the natural gas reservoirs to avoid carbon dioxide

emission into the atmosphere.

Geothermal power generation

derives electricity from

turbines driven by natural

steam formed from the thermal

energy of volcanic activity and

other sources. Accordingly,

it is a clean energy source,

without recourse to fossil fuels.

Nikkiso’s equipment is used

to monitor vital information

for the operational control of

power plants.

Liquefied natural gas (LNG)

is finding increased use as

a source of clean energy.

Ultralow-temperature pumps,

produced by Nikkiso and

a handful of companies

worldwide, are crucial for the

transportation of LNG.

Nikkiso’s products made

from carbon fiber composite

materials, featuring

high strength and lower

weight than light alloys,

help to reduce the fuel

consumption of jet engines

for commercial aircraft.

▲ NIKKISO NON-SEAL® Pump

▲ Cryogenic Submerged Motor Pump

▲ Cascades for Thrust Reversers

▲ Torque Boxes

▲ High-Pressure Process Diaphragm Pumps

▲ Online Geothermal Steam Purity Monitor

▲ Blocker Door for Thrust Reversers

We remain constantly aware of our social

responsibilities, and we continue to work to ensure

stable product supplies. Our products are employed

in a broad spectrum of applications, including in core

industries such as energy and petrochemicals, as well as

leading-edge fields such as IT, aerospace and medicine,

and are indispensable to society.

We have relocated some production facilities in

Japan as part of our business continuity plan (BCP).

This includes the decision in September 2012 to

transfer some Shizuoka Plant production functions to

newly built facilities at the Kanazawa Plant, with these

new facilities going on line in April 2014. All planned

relocation is scheduled to be completed by March 2015.

The Shizuoka Plant manufactures dialysis

equipment and aircraft components that are of great

importance to society, but the plant also lies within

the hypothetical Tokai earthquake focal region. We

carried out this relocation because we have determined

that in the event of a major disaster there is a serious

risk that materials procurement, as well as product

manufacturing and shipment, could be seriously

Relocation of Plants in Japan as Part of Our Business Continuity Plan

impeded due to large-scale damage and disruption to

the social infrastructure.

We have used this relocation as an opportunity

to upgrade productivity at the Kanazawa Plant, which

after introduction of the latest production methods

will function as a next-generation, leading-edge

manufacturing facility. Meanwhile, the Shizuoka Plant

will continue to strongly fulfill its core technological and

development functions.

We will continue to strengthen our BCP as a socially

responsible company.

with activities conducted during the first round, as well

as building benches.

In addition to contributing to society through

its business activities, the Nikkiso Group strives to

contribute to society by participating in a variety of

other activities.

In October 2013, we launched “Creating the Nikkiso

Forest” as a new volunteer activity. Through this

activity, we will support reforestation efforts under

way in Miyagi Prefecture, which suffered damage due

to the Great East Japan Earthquake in March 2011,

thereby contributing to restoration of the stricken

area. Also, twice each year our employees will visit the

forest site to conduct thinning, prepare walkways, plant

saplings and care for the forest in other ways.

We conducted our first round of activities on

October 12, 2013. Operating under the instruction of

the Miyagi Prefecture Forest Instructors Association,

some 70 employees handled such tasks as building

steps, creating pathways and thinning underbrush. The

instructors praised the enthusiasm and work ethic of

the Nikkiso employees who joined in the activities. The

second round took place on May 31, 2014. We continued

“Creating the Nikkiso Forest”—Volunteer Activity Commences



The history of Kaga Zogan—the Japanese traditional craft of metal

inlaying—dates back around 400 years to the city of Kanazawa,

Ishikawa Prefecture, and now is steadily gaining popularity in the rest

of the world. The art of Kaga Zogan focuses on quality, not showiness.

This is a philosophy that Nikkiso shares, as the Company strives to

create products with every higher levels of quality, making Kaga Zogan

a natural fi t with Nikkiso’s corporate spirit.

Nikkiso established the Soukeikai Foundation to preserve and

encourage the spread of Kaga Zogan as an important Japanese cultural

tradition, as well as to train future artisans in the craft. Through

the Soukeikai Foundation, Nikkiso also aims to contribute to the

community from which Kaga Zogan originates, helping to invigorate

Ishikawa Prefecture.

Support for Culture and the Arts

▲ Kaga Zogan (Inlay Craft)Incense burner in the shape of a lion decorated with gold and silver inlay, Koji YamakawaⅡ (1860–1930)

▲ Kaga ZoganMamoru Nakagawa (1947–),Living National Treasure in Japan

Introduction to the Activities of the Soukeikai Foundation Cultivating Successors

The Kaga Zogan Special School for

Repoussage opened in 1998 with the

goal of training the next generation

of artisans skilled in the traditional

crafts of inlay and repoussage,

thereby ensuring that these

techniques would be passed down

to future generations. Operated

through funding by the city of

Kanazawa, the school is managed by

the Soukeikai Foundation. Heading

the cadre of teachers at the school

is Mr. Mamoru Nakagawa, a living

national treasure, who provides

guidance on the production of inlay

works. Many of the school’s former

students are active in the craft and

exhibit their works.

The German educational system is unique in that upon

completion of basic schooling at the 10th grade level ,

4 years in elementary school and 6years in secondary

school, young people can decide in either going to

school for another 2 to 3 years and fi nish this with

the fi nal examination “Abitur” to study directly at a

university or take the option to take part in a relatively

fl exible vocational education, which emphasizes

working experience and certifi cations. Young people

following this vocational education take part in a dual

system whereby they undergo part-time training at a

company and attend school the remainder of the time.

This system, which helps to bridge the gap between

scholarly education and working society, is credited

with underpinning the technological skills that have

propelled Germany to its lead in craftsmanship. At the

conclusion of this dual system, apprentices undergo

strict examinations to attain specifi c qualifi cations, after

which many graduates go on to become skilled workers

Vocational School and Support for Youth

either at the companies that hosted them for vocational

training or at other companies. Upon graduation, other

students go on—either directly or following further

work experience—to attend applied science universities

or other institutions of higher learning to pursue study

as engineers. In some cases, they may attend schools

specializing in commerce and industry to pursue

technical or Meister (master craftsman) certifi cations.

Germany’s dual system of higher learning, in which

students simultaneously pursue a university education

and corporate training, provides the chance to gain

working experience at many stages of education.

LEWA started a training program in 1990 with

the aim of supporting young people to become highly

qualifi ed workers. Achieving this aim depends on three

pillars: business, technical, and social competence.

During training, these competencies are learned and

brought into consistency.

LEWA GmbH proactively supports educational activities for children and students of local

communities, perpetuating an educational system with deep roots in German society.

The program offer the ideal structural and

personal prerequisites, including a commercial training

center, the latest in workfl ows and information

technology, and its own training staff and the option

of working on social projects.

In the program, trainees enjoy a well-founded and

extensive education in all areas. They obtain technical

competence by learning the planning, execution, and

control of their work. They also fi nd, process and

pass on information, as well as solve problems in a

creative manner, to build their business competence.

Social aspects are also specifi cally trained: teamwork,

a collegial atmosphere, and consciousness of

responsibility are highly emphasized during the training.

Trainees also work on different social projects which

LEWA supports.

In addition to supporting this dual system, LEWA

cooperates with local kindergartens and schools to

encourage children with an interest in mechanical

processes. For example, the company provides

kindergartens and elementary school pupils the chance

to experience simple metalworking processes fi rsthand.

LEWA also gives junior and senior high school students

a taste of manufacturing by planning and hosting

experiential courses in metalworking.



Domestic Production Bases

Overseas Main Production Bases

Industrial Division Medical Division

Medical Division

Industrial Division

Manufactures products for the Industrial Division

In the Industrial Division, we develop, design and

manufacture pumps, water conditioning systems for

thermal and nuclear power plants, particle characterization

equipment and isostatic pressing equipment essential to

the production of laminated electronic components.

Sale of pumps and compressors, manufacture and sale of pump systems and compressor systems

Sales of industrial specialty pumps and compressors, production

and sales of systemized engineering packages incorporating such

pumps and compressors, and technical solutions services

Manufacture, sale and after-sales service of Nikkiso canned motor pumps

Manufactures and sells canned motor pumps in the Chinese

market. Augmenting production structure to meet further

increases in demand.

Manufacture, sale and after-sales service of medical products (e.g., dialysis equipment, disposable products) in the European market

Pursuing full-fl edged business in the global market for medical

products and serves as a major production base for dialysis

equipment for Europe.

Manufacture of components for thrust reverser systems in the engine nacelles of commercial aircraft

Manufactures blocker doors, torque boxes and other aircraft

components with the same high quality as in Japan and also

keeping on-time delivery. Facility expansion is under way to

enable production to meet new orders.

Manufacture and testing of cryogenic pumps

In response to growing LNG demand and to reduce exchange rate

risk, the company is taking on an increasing role as a production

base for cryogenic pumps.

Manufacture of medical equipment for dialysis treatments

Along with M.E. Nikkiso Co., Ltd., in Thailand, has a leading share

of the Japanese market for the provision of blood tubing.

Manufacture and sale of particle size analyzers

Has a leading share in Japan and supplies Microtrac particle size

analyzers throughout the world.

Manufacture, sale and after-sales service of dialysis equipment in the Chinese market

Manufacture, sale and after-sales service of dialysis equipment

with Japanese standards for the Chinese market, which ranks

among the world’s largest in terms of potential demand.

The Shizuoka Plant includes the Shizuoka Medical Factory and the Aerospace Products Factory

The plant consists of two factories. The Shizuoka Medical

Factory develops, designs and produces hemodialysis

machines and related products. While production factories

for blood tubing lines are located in Vietnam and Thailand,

the design and quality control departments are located in

Shizuoka. At the Aerospace Products Factory, we develop,

design and manufacture cascades, which are thrust

reverser components for commercial aircraft, as well as

other CFRP products.

The Kanazawa Plant includes the Medical Products Factory and the Aerospace Products Factory　The core products of this “medical factory” are hollow fi ber

dialyzers made using our proprietarily developed PEPA fi lm

and powder dialysate. The plant commenced production

of hemodialysis machines in April 2014. The Aerospace

Factory was established in April 2014.

We are transferring the manufacturing function of

medical equipment and aircraft from the Shizuoka Plant to

the Kanazawa Plant.

Manufacture and sale of reciprocating pumps and pump systems

Develops, designs, manufactures and sells reciprocating

pumps and the systems that use them. We have also

positioned LEWA’s Leonberg headquarters as the Nikkiso

Group’s strategic headquarters for pumps as we build a

global structure for the development, manufacture and

sale of pump products.

Aerospace Division

Industrial Division

Industrial Division

Industrial Division

Industrial Division

Higashimurayama Plant Geveke B.V.Netherlands

Shanghai Nikkiso Non-Seal Pump Co., Ltd. China

Nikkiso Europe GmbHGermany

Nikkiso Vietnam, Inc.Vietnam

Nikkiso Cryo, Inc.United States

Nikkiso Vietnam MFGCo., Ltd.Vietnam

Microtrac, Inc.United States

Weigao Nikkiso (Weihai) Dialysis Equipment Co., Ltd.China

Shizuoka Plant

Kanazawa Plant

LEWA GmbH Germany

Medical Division

Medical Division

Medical Division

Aerospace Division

Aerospace Division

Nikkiso Group Network


Corporate Governance

1 Corporate Governance System

a. Board of Directors and Audit & Supervisory Board

The Board of Directors meets at least once a month to

formulate basic management policy, while striving to bolster

supervisory functions through resolutions on important

management issues, regular reports on the status of business

execution and other activities. The Audit & Supervisory

Board also meets at least once a month, with duties that

include deliberating on audit policy, assigning duties to each

Audit & Supervisory Board Member, determining a specifi c

implementation agenda, and conducting hearings of audit

reports from Audit & Supervisory Board Members and

business execution updates from directors and executive

offi cers. The Audit & Supervisory Board reports its results

to the Board of Directors.

b. Other Major Administrative BodiesTo ensure swift management decision making and a

high level of management transparency, Management

Meetings are held twice a month, attended by directors

and executive offi cers, with the objective of conducting

extensive discussions and preliminary deliberations

regarding resolutions by the Board of Directors, the

policies and strategies of each operating division and other

important management issues. Furthermore, Executive

Offi cers Meetings are held periodically to deliberate on

major management strategies, report on the status of

business execution and carry out various other duties.

Management Meetings and Executive Offi cers Meetings are

also attended by the Audit & Supervisory Board Members,

who are free to express their opinions and to enter into

active discussions.

c. Accounting AuditorThe Company has appointed Deloitte Touche Tohmatsu

LLC as its accounting auditor to provide advice regarding

audits during the settlement of accounts and on general

appropriate accounting as needs dictate.

d. Internal Control SystemNikkiso recognizes the development and preservation of

an internal control system to ensure appropriate business

execution as an important management issue for the

Nikkiso Group, including its subsidiaries. We are improving

our internal control system based on our Internal Control

Basic Policy, as determined by the Board of Directors. To

facilitate optimal operation of the Internal Control System,

we established an Internal Control Committee, presided

over by a director, which deliberates on compliance,

risk management, securement of appropriate fi nancial

reporting and other issues. Moreover, we established the

Internal Control Department, under the direct control of

the President, to promote the Internal Control System

throughout the Company in a methodical and effi cient

manner and to conduct self-inspections and independent

appraisals by the Internal Auditor. Internal control in

relation to fi nancial reporting is carried out via auditing by

Deloitte Touche Tohmatsu LLC.

e. Risk Management SystemThrough the Risk Management System, Nikkiso develops

and publicizes internal regulations in response to various

specifi c risks, including product liability risk, credit risk,

insider trading risk, illicit exporting risk and personal

information leakage risk, and revises the system as

necessary. Based on internal regulations that systematically

stipulate risk management, we have established a

department for controlling companywide risk management.

Moreover, we have clarifi ed the departments responsible

for the management of each respective risk in a drive to

promote improvements to the risk management system.

f. Contracts for Limitation of LiabilityBased on the provisions of the Company’s Articles of

Incorporation, one outside director and two outside

Audit & Supervisory Board Members are contracted to

the Company with mutual limited liability in damages as

stipulated under Article 423, Item 1, of Japan’s Companies

Act. The maximum liability in damages based on this

contract is whichever is higher of ¥5 million for director,

¥3 million for Audit & Supervisory Board Member or the

legally stipulated minimum total maximum liability.

The Nikkiso Group’s corporate governance system, as

described above, is both rational and effective and

is deemed to be adequate to accomplish the Group’s

corporate governance objectives.

Nikkiso recognizes that reinforcing corporate governance is a major management priority if it

is to maintain fair and trustworthy management and earn a reputation for reliability from its

shareholders and all its other stakeholders. Accordingly, we have built a corporate governance

system as described below.

2 Internal Audits and Audits of Audit & Supervisory Board Members

The Nikkiso Group has formed an Internal Audit

Department, comprising four full-time members under the

direct control of the President, as an internal auditing body

to conduct internal audits.

Nikkiso deploys a system of Audit & Supervisory Board

Members. The Audit & Supervisory Board comprises four

Audit & Supervisory Board Members, responsible for the

auditing of the Nikkiso Group. These Audit & Supervisory

Board Members include members with signifi cant specialist

knowledge of fi nance and accounting.

The Internal Audit Department and the Audit

& Supervisory Board Members regularly exchange

information and opinions, in addition to exchanging

opinions and deliberating with the accounting auditor on

a regular basis or as needed.

3 Independent Outside Board Members

a. Number of Independent Outside Board MembersThe Company elects one director and two Audit &

Supervisory Board Members.

b. Personal Relationships, Capital Relationships, Transactional Relationships or Other Interest-Based Relationships with the Independent Outside Board Members

Other than as outside director/outside Audit & Supervisory

Board Members, no personal relationships, capital

relationships, transactional relationships or other interest-

based relationships exist between the Company and

its director and Audit & Supervisory Board Members.

Furthermore, the outside director and all outside Audit &

Supervisory Board Members are independent director/

Audit & Supervisory Board Members, as prescribed by the

Tokyo Stock Exchange.

c. Functions and Responsibilities of the Independent Outside Board Members in Nikkiso’s Corporate Governance

The roles that the Company anticipates for independent

outside board members are to supervise and audit

management decision making and business execution from

a standpoint that does not result in confl icts of interest

with general shareholders. Mr. Kenjiro Nakane, a director

who is a Certifi ed Public Accountant and a tax accountant,

provides a high level of expertise on general corporate

management based on his specialized skills in accounting

and fi nance. Mr. Yutaro Kikuchi, an Audit & Supervisory

Board Member who has many years of experience working

as an attorney, provides specialized knowledge and a broad

range of expertise concerning company law and business

management. Mr. Eisuke Nagatomo, an Audit & Supervisory

Board Member who is a former Managing Director

and Chief Regulatory Offi cer of Tokyo Stock Exchange,

Inc., brings his experience as a former member of the

Financial Services Agency Business Accounting Council

and commissioner of the Financial Accounting Standards

Foundation, providing extensive experience related to

fi nance and accounting and close familiarity with corporate

governance and compliance systems. Consequently,

Nikkiso believes that these individuals will amply fulfi ll

the function of supervising and auditing the making of

decisions and execution of business by directors from an

independent, objective and specialized perspective.

d. Standards and Policies on Independence from the Company in Its Election of the Independent Outside Board Members

The Company has not formulated specifi c standards or

policies related to independence in its election of the

independent outside board members. However, when

electing these executives, the Company refers to the

decision standards related to the independence of outside

executives prescribed by the Companies Act and the Tokyo

Stock Exchange.

e. The Company’s Position on the Status of Election of the Independent Outside Board Members

The Company elects the independent outside board

members in accordance with the standards and policies

indicated in “d.” above to fulfi ll the functions and roles

indicated in “c.” above.

f. Supervision and Audits by the Independent Outside Board Members

Independent outside board members are provided with

ample management information to enable them to fulfi ll

their supervisory and auditing functions through the

exchange of information with the Board of Directors,

the Audit & Supervisory Board and personnel executing

operations. Independent outside board members interact

regularly and exchange ideas with directors, Audit &

Supervisory Board Members and personnel executing

operations at Audit & Supervisory Board and Board of

Directors meetings. In addition, they meet regularly with

the accounting auditor, the internal auditors and the Internal

Control Department to exchange information and ideas.


Operating EnvironmentDuring the fi scal year, the Nikkiso Group’s operating

environment was characterized by various government

policies, including Bank of Japan fi scal and monetary

policies that rippled consistently outward into the real

economy and affected operating performance. Overall, the

Japanese economy enjoyed a gradual recovery. Signs were

positive for the global economy due to the steady recovery

of the U.S. economy and moves toward recovery in the

European economy, centered on Germany. These factors

overshadowed concerns about the potential impact on the

international economy of Chinese economic deceleration

and the bad debt crisis, as well as geopolitical risk from

growing confl icts in various regions of the world.

Under these circumstances, the Nikkiso Group

completed its fi rst fi scal year under the Nikkiso Vision

2018, its fi ve-year business plan. We made progress in

planning and implementing various policies in each of our

businesses, and reinforced our business foundation by

acquiring Geveke B.V. of the Netherlands, as well as the

continuous renal replacement therapy (CRRT) business.

Performance in the Industrial Business was favorable,

centering on the provision of components in growth

markets where we enjoy a high market share, such as

pumps for the energy sector and aircraft components.

In the Medical Business, domestic sales of our mainstay

dialysis-related products were favorable.

Overview of Operating PerformanceDuring the year, orders amounted to ¥122,325 million,

up 18.3% year on year; net sales were ¥121,548 million,

up 17.2%; and operating income was ¥9,423 million, up

26.0%. Net income was down 14.5% year on year to ¥5,897

million. This result primarily was due to the previous year’s

recording of an extraordinary gain on the sale of our

former head offi ce site.

Overview by Business Segment

Industrial Business

The Industrial Business comprises the Industrial Division,

which is involved in pumps and systems, as well as

precision equipment, and the Aerospace Division. This

division handles carbon fi ber reinforced plastic (CFRP) and

other aircraft components.

Overall orders in the Industrial Business amounted

to ¥69,307 million, up 26.8% year on year; sales were

¥68,588 million, up 24.3%; and segment profi t was ¥5,102

million, up 35.3%.

Medical Business

Medical DivisionIn Japan, our primary market for dialysis machines,

demand is increasing in line with medical institutions’

trends toward energy savings and automation, as well

as equipment with the functionality to handle leading-

edge treatment methods. In addition to these factors,

this division saw a second-half spike in demand ahead of

the consumption tax hike. Consequently, divisional sales

were solid, particularly for dialysis monitoring machines.

Overseas sales were lackluster, however, due to diffi cult

fi scal conditions in Europe and other regions. Operations

are moving ahead smoothly in China, where we conduct

manufacturing, sales and maintenance through a local joint

venture. With demand rising and the sales launch of highly

sophisticated models, we undertook various initiatives

to enhance collaboration with our partner in China, the

Weigao Group. In consumable items, sales of dialyzers

remained essentially unchanged, but sales of blood tubing

lines and the powder dialysate used in our proprietary

dialysis fl uid cleaning system grew fi rmly.

Owing to these factors, in the Medical Business orders

amounted to ¥53,017 million, up 8.8% year on year; sales

were ¥52,960 million, up 9.2%; and segment profi t was

¥7,845 million, up 12.7%.

Research and DevelopmentWe conduct aggressive research-and-development

activities to create new techniques—leading to the products

and technologies of the future.

In the fi eld of medical care, we are pursuing basic

research toward next-generation dialysis treatment by

augmenting the functionality of dialysis equipment and

through development initiatives involving next-generation

dialysis machines. We are also leveraging our many

years of expertise in dialysis-related technologies to

contribute to the treatment of ulcerative colitis and other

immunological diseases. To this end, we are continuing

clinical testing in Germany on blood purifi cation therapy

methods and working to further improve next-generation

artifi cial pancreases for the fi elds of internal medicine and

surgery, where we have obtained R&D and manufacturing

and sales certifi cations.

In the plant category, we are pursuing R&D toward

improving the functionality and effi ciency of large pumps

for LNG exploration sites, as well as on technologies to

increase the size and effi ciency of leak-free pumps that

protect the environment and expand their application.

Furthermore, we are striving proactively to develop new

applications for carbon fi ber composite materials, which

help to reduce the weight of commercial jet aircraft,

thereby lowering fuel consumption. We are also developing

deep ultraviolet LEDs, which in addition to conserving

electricity and having a long service life, protect the

environment by avoiding the use of toxic mercury. During

the year, R&D expenditures totaled ¥1,889 million.

Financial PositionAs of March 31, 2014, total assets came to ¥161,283 million,

up ¥22,938 million from a year earlier. The main reasons

for this rise were the acquisition of goodwill and other

intangible assets in relation to our purchase of Geveke

B.V., higher accounts receivable at LEWA in line with

higher revenues, and the purchase of property, plant and

equipment associated with transitioning the production

function from the Shizuoka Plant to the Kanazawa Plant.

Total liabilities were ¥93,911 million at fi scal year-

end, up ¥14,124 million from a year earlier. Primarily, this

expansion was due to our August 2013 issuance of ¥15,150

million in convertible bonds with stock acquisition rights

to fund the acquisition of Geveke B.V., as well as capital

investments in various businesses.

Net assets amounted to ¥67,372 million as of March 31,

2014, up ¥8,813 million. Mainly, the rise was attributable to

an increase in shareholders’ equity stemming from the rise

in income, as well as from an increase in foreign currency

translation adjustments due to yen depreciation.

Net cash provided by operating activities was ¥5,587

million, ¥2,811 million less than provided in the preceding

year. Income before income taxes was the principal factor.

Net cash used in investing activities totaled ¥15,966

million, ¥15,642 million more than in the previous year.

Payments for the acquisition of property, plant and

equipment, and for Geveke B.V., were the principal reasons.

Net cash provided by fi nancing activities was ¥2,047

million, ¥1,605 million less than these activities provided

in the preceding fi scal year. This rise mostly was due to

proceeds from the issuance of convertible bonds with stock

acquisition rights, which overshadowed the repayment of

long-term loans payable.

As a result of these fl ows, cash and cash equivalents

as of March 31, 2014, amounted to ¥19,238 million, down

¥6,317 million from a year earlier.

ROE and ROAReturn on equity fell from 12.9% to 9.6% during the year,

and return on assets decreased from 5.4% to 3.9%. The

main reason for these declines was the fall in net income,

which was affected by the impact of an extraordinary gain

Industrial DivisionAgainst the backdrop of ongoing energy-related

investments at locations throughout the world, orders

for and sales of pumps and systems remained strong,

centering on equipment for crude oil and gas production. In

response to these strong orders, we focused on augmenting

production capacity at LEWA. The expansion in orders for

LNG pumps centered on application at receiving terminals

in Asian countries. Meanwhile, sales of pumps for the

petrochemical sector remained essentially unchanged year

on year; whereas sales in Japan were sluggish, we saw an

uptick in demand centered on overseas projects. Operating

performance from Geveke B.V., which we acquired in 2013,

was included in the scope of consolidation from August.

Due to the shutdown of nuclear power plants and the

postponement of periodic inspections at fully operating

thermal power plants, the Japanese business environment

for water conditioning systems remained sluggish. In

precision equipment, the improved business climate

prompted an upsurge in R&D investment, and capital

investment recovered in related sectors. Accordingly,

orders and sales of particle analytical equipment and

electronic component manufacturing systems expanded.

As a result, Industrial Division orders totaled ¥61,130

million, up 25.5% year on year, and sales were ¥60,636

million, up 23.3%.

Aerospace DivisionAircraft manufacturers enjoyed fl ourishing demand,

centered on emerging markets. In addition to boosting

production of existing models, companies in this sector

proactively pursued the development of new models

offering improved fuel effi ciency. This trend prompted

greater demand for more lightweight parts made out of

CFRP, which in turn augmented sales of our mainstay

CFRP aircraft components. Divisional performance also

benefi ted from the foreign exchange gains resulting from

yen depreciation. The number of manufacturers capable

of using CFRP to mass-produce components with complex

geometries is limited. Taking advantage of our prowess in

this area, we made an aggressive effort to generate orders

for products other than aircraft thrust reversers and were

successful in generating multiple new orders.

Consequently, orders for the Aerospace Division came

to ¥8,172 million, a 37.6% year-on-year increase, and sales

were up 32.6% to ¥7,947 million.

In our new ultraviolet LED business, we continued with

ongoing marketing efforts. We also developed LED chips

and applications and, as part of our business development

efforts, started gearing up toward the mass production of

LED chips.

Management’s Discussion and Analysis


on sales of the former head offi ce site in the preceding

fi scal year. Total assets and total net assets also grew,

owing to the reasons outlined in the description of fi nancial

position above.

Basic Policy on Profi t Distribution and Dividends for Fiscal 2014Nikkiso’s basic policy is to return profi ts to shareholders

after comprehensive consideration for business

performance, management conditions and other pertinent

factors, while paying due attention to a stable dividend

payment. Moreover, the Company endeavors to maintain

a suffi cient level of internal reserves to fund future

long-term business development and fortify its fi nancial

standing.

Based on this policy, we paid a year-end dividend of

¥8.00 per share. Including the interim dividend, this brought

the dividend per share for the full business year to ¥16.00.

The consolidated payout ratio at year-end was 20.9%

compared with 15.7% a year earlier, and the dividend on

equity ratio stood at 1.9%, the same level as the previous year.

Forecast for the Fiscal Year Ending March 31, 2015The Nikkiso Group believes signifi cant growth in the

Japanese market to be unlikely, given such factors as

a shrinking population. However, we are aggressively

developing operations centered on expanding overseas

markets in sectors such as energy, aircraft and medical

equipment. We will continue to work steadily on measures

such as the globalization of our businesses and human

resources, the development of technologies and products

to meet market needs and the reinforcement of our quality

control system. Furthermore, in each area of business we

will review profi tability by product and region and progress

on the drafting of plans designed specifi cally to enhance

earnings and profi ts dramatically, as well as to augment

our management structure and operating performance. To

stabilize our structure for the manufacture and provision

of hemodialysis machines and aircraft components, in

April 2014 we began shifting manufacturing functions from

our Shizuoka Plant to our Kanazawa Plant—a process that

should be complete by the spring of 2015.

By sector, global energy demand is increasing due to

fuel economic growth, centered on emerging markets. We

therefore expect energy-related development spending

to increase, buoying performance in the Industrial

Business’s Industrial Division. We are concentrating the

investment of Group management resources, including

LEWA and Geveke, in growth fi elds as we work to build

development, manufacturing, sales and after-sales service

structures optimized for operations on a global basis. At

the same time, we are pursuing initiatives aimed at product

development and solution proposals that accurately meet

customer needs, as well as initiatives to augment the

profi tability of pump products. We expect the outlook for

water conditioning systems in Japan to remain problematic,

owing to the issue of restarting nuclear power reactors,

but we anticipate increased demand in relation to new

thermal power plant projects. Also, we will promote sales

of system products other than those designed for power

plants, such as gas odorization equipment and liquid

chromatography. In precision equipment, with economic

conditions and corporate performance trending upward in

key markets such as Japan and the United States, we will

work to expand sales by revising our operating systems for

particle analytical equipment and cultivating applications

and promoting proposals for various equipment used in

electronic component manufacturing.

In the Aerospace Division, in the commercial aircraft

industry the proactive development of new models

is prompting demand for the use of CFRP to reduce

component weight. In addition to its main product,

cascades, we will use our plant in Hanoi, Vietnam, to

proactively pursue new component orders. To meet rapid

expansion in our scale of operations, we will reinforce our

business foundations, augmenting human resources and

other management resources, as well as building up our

product development and quality control systems.

In the Medical Business, in Japan we expect demand

from medical institutions to continue moving toward

energy savings and automation, as well as to meet

increasingly sophisticated dialysis treatment methods. We

will contribute to advancements of hemodialysis treatments

in Japan through sales of “total system” products and

disposables centered on our mainstay dialysis monitoring

machines, as well as the enhancement of maintenance

structures. In overseas markets, which we are positioning

as a pillar of growth over the medium term, we will step

up cooperation with the Weigao Group, our partner in the

Chinese market. We will enhance our product lineup and

accelerate initiatives to meet market needs, as we strive to

boost sales of dialysis machines. In the European market,

we will restructure our operations to beef up profi tability.

We completed the transfer of the CRRT business in early

January 2014. We will push forward with efforts to put in

place business management systems, such as supply chain

and IT systems.

Against this backdrop, during the fi scal year ending

March 31, 2015, at present our consolidated operating

performance forecast is as follows. We anticipate year-on-

year increases in orders, net sales, operating income and

net income.

Cautionary Statement Regarding Forward-Looking Statements and Business RisksThe following are recognized as the main risk factors that

could adversely affect the business results, stock price and

fi nancial condition of the Nikkiso Group.

Please note also that forward-looking statements

herein represent the expectations of the Group as of the

end of the consolidated fi scal year described in this report.

Changes in Product Markets

Our principal customers in the industrial sector are in such

industries as energy, petrochemicals and power generation.

Shrinking demand or a decline in competitiveness in

these industries could have a negative impact on the

Nikkiso Group’s operating performance and fi nancial

position. Furthermore, aircraft companies account for the

majority of Nikkiso’s customers in the aerospace industry.

Accordingly, a simultaneous terrorist attack or other such

incident that substantially affected demand for aircraft

could negatively affect the Nikkiso Group’s operating

performance and fi nancial position.

Medical Insurance

There are risks of direct or indirect effects on the

hemodialysis systems and other related product markets

and prices due to government regulations on medical

insurance.

In the Nikkiso Group’s Medical Business, government

regulations on medical insurance affect dialysis-related

markets, which are a key source of sales. Such regulation

can have both direct and indirect effects on the markets

and prices for products in this business. If markets were to

shrink or prices to fall as a result of changes in government

policies, the Nikkiso Group’s operating performance and

fi nancial condition could be negatively affected.

Fluctuations in Currency Exchange Rates

There are risks from fl uctuations in the exchange rates of

the U.S. dollar and the euro, the main non-yen currencies

that are converted to yen in consolidated fi nancial reports.

The assets and liabilities of the Nikkiso Group’s overseas

subsidiaries are denominated in foreign currencies, and the

Group converts foreign currency sales, purchases, assets

and liabilities into yen when preparing its consolidated

fi nancial statements. Fluctuations in the exchange rates

for major currencies, notably the U.S. dollar and the euro,

could affect the Nikkiso Group’s operating performance

and fi nancial condition.

For the Nikkiso Group as a whole, the Nikkiso Group’s

foreign currency sales exceed its purchases that are

denominated in foreign currencies, and foreign currency

assets outweigh foreign currency liabilities. As a result,

appreciation of the yen against these currencies could

have a negative effect on the Nikkiso Group’s operating

performance and fi nancial condition.

Overseas Production

As overseas sales grow in relation to the Nikkiso Group’s

total sales, its overseas production ratio is also rising. In

the Industrial Business, we make pump products mainly

in Germany and the United States, with some parts also

manufactured in China, Taiwan and other countries. The

Company produces some aircraft components in Vietnam,

as well. In the Medical Business, the Group manufactures

consumable equipment and blood tubing lines in Vietnam

and Thailand, and some hemodialysis machines in Germany

and through a joint venture in China.

Accordingly, changes in laws and regulations or changes

in political and economic factors in those regions could

affect normal company operations and the production

activities at overseas subsidiaries. Such changes could

have a negative effect on the Nikkiso Group’s operating

performance and fi nancial condition.

Performance of Overseas Subsidiaries

The Nikkiso Group acquires and invests in companies and

businesses in Japan and overseas in an effort to enhance its

lineup of products and technologies in existing businesses,

reinforce sales routes and acquire new businesses. The

Nikkiso Group believes that such acquisitions will strengthen

its operations and lead to higher future growth. However,

if the performance of such businesses were to fall

signifi cantly, the Nikkiso Group’s performance and fi nancial

condition could be negatively affected.

Other

In addition to the factors described above, events such

as a downturn in the global economic environment, the

outbreak of confl ict or a large-scale natural disaster

that signifi cantly affected the Nikkiso Group’s operating

environment could negatively affect the performance and

fi nancial condition of the Nikkiso Group.

(Millions of Yen)

Orders Net sales Operatingincome Net income

¥135,000 ¥135,000 ¥10,000 ¥6,000

Up 10.4%year on year

Up 11.1% Up 6.1% Down 1.7%

Management’s Discussion and Analysis


Millions of Yen

Thousands of U.S. Dollars(Note 1)

2014 2013 2014ASSETS

Current Assets:

Cash and cash equivalents (Notes 8 and 18) ¥19,238 ¥25,556 $188,608

Short-term investments (Note 4) 490 1,094 4,807

Notes and accounts receivable:

Trade (Note 18) 40,157 32,673 393,698

Unconsolidated subsidiaries and affiliated companies 1,015 761 9,953

Other 623 12 6,105

Allowance for doubtful accounts (783) (622) (7,679)

Inventories (Note 6) 21,695 19,371 212,699

Deferred tax assets (Note 12) 1,606 1,465 15,746

Other current assets 2,113 1,978 20,711

Total current assets 86,154 82,288 844,648

Property, Plant and Equipment (Notes 7 and 8):

Land 4,344 3,656 42,590

Buildings and structures 29,719 23,473 291,359

Machinery and equipment 22,134 17,999 216,999

Lease assets (Note 15) 226 291 2,215

Construction in progress 784 1,926 7,683

Others 10,048 8,879 98,506

Accumulated depreciation (40,198) (36,613) (394,094)

Property, plant and equipment, net 27,057 19,611 265,258

Investments and Other Assets:

Investment securities (Notes 5 and 18) 11,743 9,349 115,129

Investments in unconsolidated subsidiaries and affiliated companies (Note 18) 1,141 886 11,190

Long-term loans receivable 5 4 54

Goodwill (Note 16) 25,662 22,116 251,591

Prepaid pension expense (Note 9) 111

Lease assets 38 57 372

Deferred tax assets (Note 12) 255 265 2,500

Other assets 9,243 3,675 90,612

Allowance for doubtful accounts (14) (17) (139)

Total investments and other assets 48,073 36,446 471,309

Total ¥161,284 ¥138,345 $1,581,215

Millions of Yen


2014 2013 2014LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Short-term bank loans (Notes 8 and 18) ¥ 8,433 ¥ 8,242 $ 82,680

Current portion of long-term debt (Notes 8 and 18) 5,725 11,211 56,132

Notes and accounts payable:

Trade (Note 18) 16,990 14,604 166,568

Unconsolidated subsidiaries and affiliated companies 8 17 78

Construction and other (Note 18) 2,918 2,241 28,604

Income taxes payable (Notes 12 and 18) 2,253 2,830 22,085

Accrued expenses 4,609 3,482 45,183

Deposits received:

Unconsolidated subsidiaries and affiliated companies 80 100 788

Other 337 319 3,301

Allowance for loss on factory restructuring (Note 17) 133 1,307

Deferred tax liabilities (Note 12) 335 74 3,289

Other current liabilities 2,694 2,955 26,411

Total current liabilities 44,515 46,075 436,426

Long-term Liabilities:

Long-term debt (Notes 8 and 18) 42,714 30,600 418,761

Liability for employees' retirement benefits (Note 9) 3,026 446 29,670

Allowance for retirement benefit for directors and audit & supervisory board members 160 160 1,567

Allowance for loss on factory restructuring (Note 17) 177

Deferred tax liabilities (Note 12) 3,437 2,238 33,693

Other long-term liabilities 60 91 586

Total long-term liabilities 49,397 33,712 484,277

Commitments and Contingent Liabilities (Notes 15 and 19)

Equity (Notes 10 and 22):

Common stock- authorized, 249,500,000 shares; issued, 80,286,464 shares in 2014 and 2013 6,544 6,544 64,160

Capital surplus 10,701 10,701 104,915

Stock acquisition rights (Note 11) 30 14 294

Retained earnings 45,254 40,592 443,674

Treasury stock-at cost, 3,163,543 shares in 2014 and 3,149,881 shares in 2013 (2,312) (2,292) (22,671)

Accumulated other comprehensive income (loss)

Unrealized gain on available-for-sale securities 3,990 2,472 39,118

Foreign currency translation adjustments 3,209 (779) 31,459

Defined retirement benefit plans (1,596) (15,652)

Total 65,820 57,252 645,297

Minority interests 1,552 1,306 15,215

Total Equity 67,372 58,558 660,512

Total ¥161,284 ¥138,345 $1,581,215

See notes to consolidated financial statements.

Consolidated Balance SheetNIKKISO CO., LTD. and its Consolidated SubsidiariesAs of March 31, 2014


Financial Section

Millions of Yen


2014 2013 2014Net Sales ¥121,549 ¥103,670 $1,191,655

Cost of Sales (Notes 9, 14 and 15) 77,595 69,431 760,737

Gross profit 43,954 34,239 430,918

Selling, General and Administrative Expenses (Notes 9, 14, 15 and 16) 34,530 26,757 338,530 Operating income 9,424 7,482 92,388

Other Income (expenses): Interest and dividend income 258 251 2,530 Interest expense (734) (757) (7,199) Gain on sale of investment securities 4 44 Gain on sale of property, plant and equipment 9 2,657 84 Legal settlement income 182 Loss on write-down of investment securities (156) (52) (1,534) Loss on sale and disposal of property, plant and equipment (27) (46) (266)

Loss on impairment of long-lived assets (Notes 7) (334) (3,278)

Equity in earnings of affiliated companies 187 10 1,836 Foreign exchange gain, net 1,724 1,500 16,907 Loss on factory restructuring (Note 17) (124) (177) (1,211) Business purchasing expenses (441) (4,327) Other, net 470 310 4,617 Other income - net 836 3,878 8,203 Income before Income taxes and Minority Interests 10,260 11,360 100,591

Income Taxes (Note 12): Current 4,108 3,809 40,275 Deferred 176 451 1,723 Total income taxes 4,284 4,260 41,998

Net Income before Minority Interests 5,976 7,100 58,593

Minority Interests in Net Income 79 202 778

Net Income ¥ 5,897 ¥ 6,898 $ 57,815

Per Share of Common Stock (Note 21): Yen U.S. Dollars (Note 1)

2014 2013 2014Basic net income ¥76.46 ¥89.41 $0.75

Diluted net income 70.78 89.40 0.69

Cash dividends applicable to the year 16.00 14.00 0.16

Millions of Yen

Outstanding number of shares of

common stock

Common stock

Capital surplus

Stock subscription

rights

Retained earnings

Treasury stock


Total Minority interests Total equity

Unrealized gain on

available-for-sale

securities

Foreign currency

translation adjustments

Definedretirement

benefitplans

Balance, April 1, 2012 77,153,248 ¥6,544 ¥10,701 ¥34,619 ¥(2,276) ¥1,659 ¥(1,870) ¥49,377 ¥1,016 ¥50,393

Net Income 6,898 6,898 6,898

Cash dividends, ¥12.00 per share (925) (925) (925)

Purchase of treasury stock (17,565) (16) (16) (16)

Disposal of treasury stock 900 0 0 0 0

Net change in the year ¥14 813 1,091 1,918 290 2,208

Balance, March 31, 2013 77,136,583 6,544 10,701 14 40,592 (2,292) 2,472 (779) 57,252 1,306 58,558

Net Income 5,897 5,897 5,897

Cash dividends, ¥16.00 per share (1,235) (1,235) (1,235)

Purchase of treasury stock (19,670) (24) (24) (24)

Disposal of treasury stock 6,008 0 4 4 4

Net change in the year 16 1,518 3,988 ¥(1,596) 3,926 246 4,172

Balance, March 31, 2014 77,122,921 ¥6,544 ¥10,701 ¥30 ¥45,254 ¥(2,312) ¥3,990 ¥3,209 ¥(1,596) ¥65,820 ¥1,552 ¥67,372

Thousands of U.S. Dollars (Note 1)

Outstanding number of shares of

common stock

Common stock

Capital surplus

Stock subscription

rights

Retained earnings

Treasury stock


Total Minority interests Total equity

Unrealized gain on

available-for-sale

securities

Foreign currency

translation adjustments

Definedretirement

benefitplans

Balance, April 1, 2013 $64,160 $104,911 $142 $397,958 $(22,474) $24,240 $ (7,639) $561,298 $12,803 $574,101

Net Income 57,815 57,815 57,815

Cash dividends, $0.16 per share (12,099) (12,099) (12,099)

Purchase of treasury stock (240) (240) (240)

Disposal of treasury stock 4 43 47 47

Net change in the year 152 14,878 39,098 $(15,652) 38,476 2,412 40,888

Balance, March 31, 2014 $64,160 $104,915 $294 $443,674 $(22,671) $39,118 $31,459 $(15,652) $645,297 $15,215 $660,512



Millions of Yen


2014 2013 2014Net Income before Minority Interests ¥ 5,976 ¥7,100 $ 58,593

Other Comprehensive Income (Note 20): Unrealized gain on available-for-sale securities 1,516 812 14,862 Foreign currency translation adjustments 3,997 1,157 39,181 Shares of other comprehensive income in associates 166 85 1,631 Total other comprehensive income 5,679 2,054 55,674

Comprehensive Income ¥11,655 ¥9,154 $114,267

Total Comprehensive Income attributable to: Owners of the parent ¥11,403 ¥8,802 $111,791 Minority interests 252 352 2,476

Consolidated Statement of Income NIKKISO CO., LTD. and its Consolidated SubsidiariesFor the year ended March 31, 2014

Consolidated Statement of Comprehensive IncomeNIKKISO CO., LTD. and its Consolidated SubsidiariesFor the year ended March 31, 2014

Consolidated Statement of Changes in EquityNIKKISO CO., LTD. and its Consolidated SubsidiariesFor the year ended March 31, 2014

Financial Section


The accompanying consolidated financial statements have

been prepared in accordance with the provisions set forth

in the Japanese Financial Instruments and Exchange Act

and its related accounting regulations and in accordance

with accounting principles generally accepted in Japan

(“Japanese GAAP”), which are different in certain respects

as to the application and disclosure requirements of

International Financial Reporting Standards.

In preparing these consolidated financial statements,

certain reclassifications and rearrangements have been

made to the consolidated financial statements issued

domestically in order to present them in a form which is

more familiar to readers outside Japan. In addition, certain

(1) ConsolidationThe consolidated financial statements as of March 31, 2014,

include the accounts of the Company and its 61 (42 in 2013)

significant subsidiaries (together, the “Group”).

Under the control or influence concept, those companies

in which the Company, directly or indirectly, is able to

exercise control over operations are fully consolidated,

and those companies over which the Group has the ability

to exercise significant influence are accounted for by the

equity method.

Investments in 4 (4 in 2013) associated companies

are accounted for by the equity method. Investments in

the remaining unconsolidated subsidiaries and associated

companies are stated at cost. If the equity method of

accounting had been applied to the investments in these

companies, the effect on the accompanying consolidated

financial statements would not be material.

All significant intercompany balances and transactions

have been eliminated in consolidation. All material

unrealized profit included in assets resulting from

transactions within the Group is also eliminated.

(2) Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements

In May 2006, the Accounting Standards Board of Japan (the

“ASBJ”) issued ASBJ Practical Issues Task Force (PITF)

No. 18, “Practical Solution on Unification of Accounting

Policies Applied to Foreign Subsidiaries for the

Consolidated Financial Statements.” PITF No. 18 prescribes

that the accounting policies and procedures applied to a

parent company and its subsidiaries for similar transactions

and events under similar circumstances should in principle

be unified for the preparation of the consolidated financial

reclassifications have been made in the 2013 consolidated

financial statements to conform to the classifications used

in 2014.

The consolidated financial statements are stated

in Japanese yen, the currency of the country in which

Nikkiso Co., Ltd. (the “Company”) is incorporated and

operates. The translations of Japanese yen amounts into

U.S. dollar amounts are included solely for the convenience

of readers outside Japan and have been made at the rate

of ¥102 to $1, the approximate rate of exchange at March

31, 2014. Such translations should not be construed as

representations that the Japanese yen amounts could be

converted into U.S. dollars at that or any other rate.

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Millions of Yen


2014 2013 2014Cash flows from operating activities:

Income before income taxes and minority interests ¥ 10,260 ¥ 11,360 $ 100,591

Adjustments for:

Income taxes paid (5,105) (3,073) (50,045)

Income taxes refunded 3 8 29

Depreciation and amortization 5,238 4,340 51,357

Loss on impairment of long-lived assets 334 3,278

Gain on sale of investment securities (4) (44)

Loss on write-down of investment securities 156 52 1,534

Gain on sale of property, plant and equipment (9) (2,657) (84)

Loss on sale and disposal of property, plant and equipment 27 46 266

Equity in earnings of affiliated companies (187) (10) (1,836)

Provision for doubtful accounts (22) 97 (216)

Foreign exchange gain (204) (331) (2,006)

Changes in assets and liabilities:

Increase in notes and accounts receivable (3,902) (2,007) (38,252)

Decrease (increase) in inventories 723 (2,353) 7,088

Decrease in interest and dividend receivable 54 60 531

(Decrease) increase in notes and accounts payable (509) 1,385 (4,993)

Decrease in liability for employees' retirement benefits (26) (12) (258)

Other (1,239) 1,494 (12,157)

Net cash provided by operating activities 5,588 8,399 54,783

Cash flows from investing activities:

Decrease (increase) in short-term investments, net 724 (312) 7,097

Payments for purchases of property, plant and equipment (8,197) (3,693) (80,364)

Proceeds from sale of property, plant and equipment 22 4,022 218

Payments for purchase of other assets (189) (350) (1,854)

Proceeds from sale and redemption of investment securities 12 5 120

Payment for acquisition of shares of a newly consolidated subsidiary, net of cash acquired (Note 13)

(8,326) (81,623)

Collection of loans receivable 10 16 97

Payments for loans receivable (11) (12) (109)

Other (12) (117)

Net cash used in investing activities (15,967) (324) (156,535)

Cash flows from financing activities:

(Decrease) Increase in short-term bank loans (1,839) 1,265 (18,034)

Proceeds from long-term debt 16,678 13,691 163,514

Repayment of long-term debt (11,517) (10,300) (112,913)

Repurchase of treasury stock (24) (15) (240)

Disposal of treasury stock 0 0

Cash dividends paid (1,234) (925) (12,099)

Cash dividends paid to minority shareholders (16) (63) (154)

Net cash provided by financing activities 2,048 3,653 20,074

Effect of exchange rate changes on cash and cash equivalents 2,013 695 19,741

Net (decrease) increase in cash and cash equivalents (6,318) 12,423 (61,937)

Increase in cash and cash equivalents from a newly consolidatedsubsidiary 25

Cash and cash equivalents at beginning of year 25,556 13,108 250,545

Cash and cash equivalents at end of year ¥ 19,238 ¥ 25,556 $ 188,608

Consolidated Statement of Cash FlowsNIKKISO CO., LTD. and its Consolidated SubsidiariesFor the year ended March 31, 2014


statements. However, financial statements prepared by

foreign subsidiaries in accordance with either International

Financial Reporting Standards or generally accepted

accounting principles in the United States of America

tentatively may be used for the consolidation process,

except for the following items that should be adjusted in

the consolidation process so that net income is accounted

for in accordance with Japanese GAAP, unless they are

not material: 1) amortization of goodwill; 2) scheduled

amortization of actuarial gain or loss of pensions that

has been directly recorded in the equity; 3) expensing

capitalized development costs of R&D; 4) cancellation of

the fair value model accounting for property, plant and

equipment and investment properties and incorporation of

the cost model of accounting; and 5) exclusion of minority

interests from net income, if contained in net income.

(3) Unification of Accounting Policies Applied to Foreign Affiliated Companies for the Equity Method

In March 2008, the ASBJ issued ASBJ Statement No. 16,

“Accounting Standard for Equity Method of Accounting

for Investments.” The new standard requires adjustments

to be made to conform the affiliate’s accounting policies

for similar transactions and events under similar

circumstances to those of the parent company when the

affiliate’s financial statements are used in applying the

equity method unless it is impracticable to determine such

adjustments. In addition, financial statements prepared

by foreign affiliated companies in accordance with either

International Financial Reporting Standards or generally

accepted accounting principles in the United States of

America tentatively may be used in applying the equity

method if the following items are adjusted so that net

Notes to Consolidated Financial StatementsNIKKISO CO., LTD. and its Consolidated SubsidiariesFor the year ended March 31, 2014

Financial Section

37Annual Report 201436 NIKKISO Co., Ltd.

income is accounted for in accordance with Japanese GAAP,

unless they are not material: 1) amortization of goodwill; 2)

scheduled amortization of actuarial gain or loss of pensions

that has been directly recorded in the equity; 3) expensing

capitalized development costs of R&D; 4) cancellation of

the fair value model of accounting for property, plant and

equipment and investment properties and incorporation of

the cost model of accounting; and 5) exclusion of minority

interests from net income, if contained in net income.

(4) Business CombinationsIn October 2003, the Business Accounting Council

issued a Statement of Opinion, “Accounting for Business

Combinations,” and in December 2005, the ASBJ issued

ASBJ Statement No. 7, “Accounting Standard for Business

Divestitures” and ASBJ Guidance No. 10,“Guidance for

Accounting Standard for Business Combinations and

Business Divestitures”.

The accounting standard for business combinations

allowed companies to apply the pooling-of-interests

method of accounting only when certain specific criteria

are met such that the business combination is essentially

regarded as a uniting of interests.

For business combinations that do not meet the

uniting-of-interests criteria, the business combination is

considered to be an acquisition and the purchase method

of accounting is required. This standard also prescribes

the accounting for combinations of entities under common

control and for joint ventures.

In December 2008, the ASBJ issued a revised

accounting standard for business combinations, ASBJ

Statement No. 21, “Accounting Standard for Business

Combinations.” Major accounting changes under the revised

accounting standard are as follows: (1) The revised standard

requires accounting for business combinations only by the

purchase method. As a result, the pooling-of-interests

method of accounting is no longer allowed. (2) The previous

accounting standard required research and development

costs to be charged to income as incurred. Under the

revised standard, in-process research and development

costs acquired in the business combination are capitalized

as an intangible asset. (3) The previous accounting

standard provided for a bargain purchase gain (negative

goodwill) to be systematically amortized over a period

not exceeding 20 years. Under the revised standard, the

acquirer recognizes the bargain purchase gain in profit or

loss immediately on the acquisition date after reassessing

and confirming that all of the assets acquired and all of the

liabilities assumed have been identified after a review of

the procedures used in the purchase price allocation. The

revised standard was applicable to business combinations

undertaken on or after April 1, 2010.

(5) Cash EquivalentsCash equivalents are short-term investments that are

readily convertible into cash and that are exposed to

insignificant risk of changes in value.

Cash equivalents include time deposits, which mature or

become due within three months of the date of acquisition.

(6) InventoriesInventories are stated at the lower of cost, determined by

the moving-average method with the exception of certain

finished products and work in process by the specification

method, or net selling value.

(7) Marketable and Investment SecuritiesMarketable and investment securities are classified and

accounted for, depending on management’s intent, as

follows:

-Marketable available-for-sale securities, which are not

classified as trading securities or held-to-maturity debt

securities, are reported at fair value, with unrealized gains

and losses, net of applicable taxes, reported in a separate

component of equity.

-Nonmarketable available-for-sale securities are stated at

cost determined by the moving-average method.

For other-than-temporary declines in fair value,

investment securities are reduced to net realizable value

by a charge to income.

(8) Property, Plant and EquipmentProperty, plant and equipment are stated at cost.

Depreciation of property, plant and equipment of the

Company and its consolidated domestic subsidiaries is

computed mainly by the declining-balance method based

on the estimated useful lives of the assets. The straight-line

method is applied to certain buildings of the Company and

its consolidated domestic subsidiaries, and all property,

plant and equipment of consolidated foreign subsidiaries.

The range of useful lives is principally from 3 to 50 years

for buildings and structures and from 4 to 8 years for

machinery.

Under certain conditions such as exchanges of fixed

assets of similar kinds and cash subsidies granted from

governmental or municipal authorities, Japanese tax laws

permit an entity to defer the recognition of profit arising

from such transactions by reducing the cost of the assets

acquired or by providing a special reserve in the equity

section. The reduction of the cost of the assets as of March

31, 2014 and 2013, was ¥1,190 million ($11,668 thousand)

and ¥990 million, respectively, and the special reserve

in the equity section as a part of retained earnings as

of March 31, 2014 and 2013, was ¥2,115 million ($20,732

thousand) and ¥2,115 million, respectively.

(9) Long-Lived Assets The Group reviews its long-lived assets for impairment

whenever events or changes in circumstances indicate

the carrying amount of an asset or asset group may not

be recoverable. An impairment loss is recognized if the

carrying amount of an asset or asset group exceeds the

sum of the undiscounted future cash flows expected to

result from the continued use and eventual disposition of

the asset or asset group. The impairment loss would be

measured as the amount by which the carrying amount

of the asset exceeds its recoverable amount, which is the

higher of the discounted cash flows from the continued

use and eventual disposition of the asset or the net selling

price at disposition.

(10) GoodwillGoodwill, which was recognized by the Group, is subject to

amortization over a period not to exceed 20 years and a

test for impairment.

(11) Retirement and Pension PlansThe Company and certain domestic consolidated

subsidiaries have non-contributory defined benefit pension

plans. The Group accounts for the liability for employees’

retirement benefits based on the projected benefit

obligations and plan assets at the balance sheet date.

Certain consolidated subsidiaries have defined contribution

pension plans.

Effective April 1, 2000, the Company adopted a

new accounting standard for retirement benefits and

accounted for the liability for retirement benefits based

on the projected benefit obligations and plan assets at

the balance sheet date. The projected benefit obligations

are attributed to periods on a straight-line basis. Actuarial

gains and losses are amortized on a straight-line basis over

10 years within the average remaining service period. Past

service costs are amortized on a straight-line basis over

10 years within the average remaining service period. The

transitional obligation of ¥100 million ($984 thousand),

determined as of April 1, 2000, is being amortized over 10

years.

In May 2012, the ASBJ issued ASBJ Statement

No. 26, “Accounting Standard for Retirement Benefits” and

ASBJ Guidance No. 25, “Guidance on Accounting Standard

for Retirement Benefits,” which replaced the accounting

standard for retirement benefits that had been issued by

the Business Accounting Council in 1998 with an effective

date of April 1, 2000, and the other related practical

guidance, and were followed by partial amendments from

time to time through 2009.

(a) Under the revised accounting standard, actuarial

gains and losses and past service costs that are yet to be

recognized in profit or loss are recognized within equity

(accumulated other comprehensive income), after adjusting

for tax effects, and any resulting deficit or surplus is

recognized as a liability (liability for retirement benefits) or

asset (asset for retirement benefits).

(b) The revised accounting standard does not change how

to recognize actuarial gains and losses and past service

costs in profit or loss. Those amounts are recognized

in profit or loss over a certain period no longer than

the expected average remaining service period of the

employees. However, actuarial gains and losses and past

service costs that arose in the current period and have

not yet been recognized in profit or loss are included

in other comprehensive income and actuarial gains and

losses and past service costs that were recognized in

other comprehensive income in prior periods and then

recognized in profit or loss in the current period shall be

treated as reclassification adjustments (see Note 2.(25)).

(c) The revised accounting standard also made certain

amendments relating to the method of attributing expected

benefit to periods and relating to the discount rate and

expected future salary increases.

This accounting standard and the guidance for (a) and (b)

above are effective for the end of annual periods beginning

on or after April 1, 2013, and for (c) above are effective for

the beginning of annual periods beginning on or after April

1, 2014, or for the beginning of annual periods beginning

on or after April 1, 2015, subject to certain disclosure in

March 2015, both with earlier application being permitted

from the beginning of annual periods beginning on or after

April 1, 2013. However, no retrospective application of this

accounting standard to consolidated financial statements in

prior periods is required.

The Company applied the revised accounting standard

and guidance for retirement benefits for (a) and (b)

above, effective March 31, 2014. As a result, liability for

employees’ retirement benefits of ¥3,026 million ($29,670

thousand) was recorded as of March 31, 2014, and

accumulated other comprehensive income as of March 31,

2014, decreased by ¥1,596 million ($15,652 thousand).

(12) Allowance for Retirement Benefit for Directors and Audit & Supervisory Board Members

Retirement benefits to directors and Audit & Supervisory

Board members under the unfunded retirement allowance

plans were provided at the amount that would be required

if all directors and Audit & Supervisory Board members

of the Company and certain domestic subsidiaries retired

at the balance sheet date. However, effective the date of

the stockholders’ meeting of the Company in 2006, and

of certain domestic subsidiaries in 2011, the unfunded

retirement allowance plans were terminated. Retirement

benefits during the service period, up until the date of

abolishment of the retirement benefits plan for directors

and Audit & Supervisory Board members, were recorded

as “Allowance for retirement benefit for directors and audit

& supervisory board members”.

(13) Allowance for Loss on Factory RestructuringAllowance for loss on factory restructuring was provided

for the relocation of most of the Company’s production

capability of medical equipment and aircraft parts in

Financial Section


Shizuoka plant to Kanazawa plant, which is scheduled to be

completed by March 2015.

(14) Asset Retirement ObligationsIn March 2008, the ASBJ issued ASBJ Statement No. 18,

“Accounting Standard for Asset Retirement Obligations” and

ASBJ Guidance No. 21, “Guidance on Accounting Standard

for Asset Retirement Obligations”. Under this accounting

standard, an asset retirement obligation is defined as a

legal obligation imposed either by law or contract that

results from the acquisition, construction, development

and the normal operation of a tangible fixed asset and

is associated with the retirement of such tangible fixed

asset. The asset retirement obligation is recognized as the

sum of the discounted cash flows required for the future

asset retirement and is recorded in the period in which the

obligation is incurred if a reasonable estimate can be made.

If a reasonable estimate of the asset retirement obligation

cannot be made in the period the asset retirement

obligation is incurred, the liability should be recognized

when a reasonable estimate of asset retirement obligation

can be made. Upon initial recognition of a liability for

an asset retirement obligation, an asset retirement cost

is capitalized by increasing the carrying amount of the

related fixed asset by the amount of the liability. The

asset retirement cost is subsequently allocated to expense

through depreciation over the remaining useful life of the

asset. Over time, the liability is accreted to its present

value each period. Any subsequent revisions to the timing

or the amount of the original estimate of undiscounted

cash flows are reflected as an adjustment to the carrying

amount of the liability and the capitalized amount of the

related asset retirement cost.

(15) Stock OptionsASBJ Statement No. 8, ”Accounting Standard for Stock

Options” and related guidance are applicable to stock

options granted on and after May 1, 2006. This standard

requires companies to measure the cost of employee stock

options based on the fair value at the date of grant and

recognize compensation expense over the vesting period

as consideration for receiving goods or services. The

standard also requires companies to account for stock

options granted to non-employees based on the fair value

of either the stock option or the goods or services received.

In the balance sheet, the stock option is presented as stock

acquisition rights as a separate component of equity until

exercised.

(16) Research and Development CostsResearch and development costs are charged to income as

incurred.

(17) LeasesIn March 2007, the ASBJ issued ASBJ Statement

No. 13, “Accounting Standard for Lease Transactions,”

which revised the previous accounting standard for lease

transactions. The revised accounting standard for lease

transactions was effective for fiscal years beginning on or

after April 1, 2008.

Under the previous accounting standard, finance leases

that were deemed to transfer ownership of the leased

property to the lessee were to be capitalized. However,

other finance leases were permitted to be accounted for

as operating lease transactions if certain “as if capitalized”

information was disclosed in the notes to the lessee’s

financial statements. The revised accounting standard

requires that all finance lease transactions should

be capitalized by recognizing lease assets and lease

obligations in the balance sheet.

In addition, the revised accounting standard permits

leases that existed at the transition date and do not

transfer ownership of the leased property to the lessee to

be measured at the obligations under finance leases less

interest expense at the transition date and recorded as

acquisition cost of lease assets.

All other leases are accounted for as operating leases.

(18) Bonuses to Directors and Audit & Supervisory Board Members

Bonuses to directors and Audit & Supervisory Board

members are accrued at the year end to which such

bonuses are attributable.

(19) Income TaxesThe provision for income taxes is computed based

on the pretax income included in the consolidated

statement of income. The asset and liability approach

is used to recognize deferred tax assets and liabilities

for the expected future tax consequences of temporary

differences between the carrying amounts and the

tax bases of assets and liabilities. Deferred taxes are

measured by applying currently enacted income tax rates

to the temporary differences.

(20) Foreign Currency TransactionsAll short-term and long-term monetary receivables and

payables denominated in foreign currencies are translated

into Japanese yen at the exchange rates at the balance

sheet date. The foreign exchange gains and losses from

translation are recognized in the consolidated statement of

income to the extent that they are not hedged by forward

exchange contracts.

(21) Foreign Currency Financial StatementsThe balance sheet accounts of the consolidated foreign

subsidiaries are translated into Japanese yen at the current

exchange rate as of the balance sheet date except for

equity, which is translated at the historical rate.

Differences arising from such translation are shown

as “Foreign currency translation adjustments” under

accumulated other comprehensive income in a separate

component of equity.

Revenue and expense accounts of consolidated

foreign subsidiaries are translated into yen at the average

exchange rate.

(22) Derivatives and Hedging Activities The Group uses derivative financial instruments to

manage its exposures to fluctuations in foreign exchange

and interest rates. Foreign exchange forward contracts,

interest rate swaps and interest rate and currency swap

are utilized by the Group to reduce foreign currency

exchange and interest rate risks. The Group does not enter

into derivatives for trading or speculative purposes.

Derivative financial instruments are classified and

accounted for as follows: a) all derivatives are recognized

as either assets or liabilities and measured at fair value,

and gains or losses on derivative transactions are

recognized in the consolidated statement of income and

b) for derivatives used for hedging purposes, if such

derivatives qualify for hedge accounting because of

high correlation and effectiveness between the hedging

instruments and the hedged items, gains or losses on

derivatives are deferred until maturity of the hedged

transactions.

Foreign currency forward contracts employed to hedge

foreign exchange exposures are measured at fair value and

the unrealized gains/losses are recognized in income.

The interest rate swaps which qualify for hedge

accounting and meet specific matching criteria are not

remeasured at market value, but the differential paid or

received under the swap agreements are recognized and

included in interest expense.

Interest rate and currency swaps which quality for

hedge accounting and meet specific matching criteria are

not remeasured at market value, but the differential paid

or received under the swap agreements is recognized and

included in interest expense or income, and long-term

debts that are denominated in foreign currencies and have

been hedged by interest rate and currency swap contracts

are translated at the contracted rates.

(23) Per Share InformationBasic net income per share is computed by dividing net

income available to common shareholders by the weighted-

average number of common stocks outstanding for the

period, retroactively adjusted for stock splits.

Diluted net income per share reflects the potential

dilution that could occur if the Company’s stock options

were exercised. Diluted net income per share of common

stock assumes full exercise of the outstanding stock

options at the beginning of the year (or at the time of

issuance) with applicable adjustments.

Cash dividends per share presented in the

accompanying consolidated statement of income are

dividends applicable to the respective fiscal years,

including dividends to be paid after the end of the year.

(24) Accounting Changes and Error CorrectionsIn December 2009, the ASBJ issued ASBJ Statement

No. 24, “Accounting Standard for Accounting Changes and

Error Corrections” and ASBJ Guidance No. 24, “Guidance

on Accounting Standard for Accounting Changes and Error

Corrections.” Accounting treatments under this standard

and guidance are as follows: (1) Changes in Accounting

Policies—When a new accounting policy is applied following

revision of an accounting standard, the new policy is

applied retrospectively unless the revised accounting

standard includes specific transitional provisions, in

which case the entity shall comply with the specific

transitional provisions. (2) Changes in Presentation—When

the presentation of financial statements is changed, prior-

period financial statements are reclassified in accordance

with the new presentation. (3) Changes in Accounting

Estimates—A change in an accounting estimate is accounted

for in the period of the change if the change affects that

period only, and is accounted for prospectively if the

change affects both the period of the change and future

periods. (4) Corrections of Prior-Period Errors—When an

error in prior-period financial statements is discovered,

those statements are restated.

(25) New Accounting PronouncementsAccounting Standard for Retirement Benefits—On May 17,

2012, the ASBJ issued ASBJ Statement No. 26, “Accounting

Standard for Retirement Benefits” and ASBJ Guidance

No. 25, “Guidance on Accounting Standard for Retirement

Benefits,” which replaced the Accounting Standard for

Retirement Benefits that had been issued by the Business

Accounting Council in 1998 with an effective date of April

1, 2000, and the other related practical guidance, and

followed by partial amendments from time to time through

2009.

Major changes are as follows:

(a) Treatment in the balance sheet—Under the current

requirements, actuarial gains and losses and past service

costs that are yet to be recognized in profit or loss are

not recognized in the balance sheet, and the difference

between retirement benefit obligations and plan assets

(hereinafter, “deficit or surplus”), adjusted by such

unrecognized amounts, is recognized as a liability or asset.

Under the revised accounting standard, actuarial gains and

losses and past service costs that are yet to be recognized

in profit or loss shall be recognized within equity

(accumulated other comprehensive income), after adjusting

for tax effects, and any resulting deficit or surplus shall be

recognized as a liability (liability for retirement benefits) or

asset (asset for retirement benefits).

(b) Treatment in the statement of income and the statement

Financial Section


of comprehensive income—The revised accounting

standard does not change how to recognize actuarial

gains and losses and past service costs in profit or loss.

Those amounts would be recognized in profit or loss over

a certain period no longer than the expected average

remaining working lives of the employees. However,

actuarial gains and losses and past service costs that arose

in the current period and have not yet been recognized

in profit or loss shall be included in other comprehensive

income and actuarial gains and losses and past service

costs that were recognized in other comprehensive income

in prior periods and then recognized in profit or loss in

the current period shall be treated as reclassification

adjustments.

(c) Amendments relating to the method of attributing

expected benefit to periods and relating to the discount

rate and expected future salary increases—The revised

accounting standard also made certain amendments

relating to the method of attributing expected benefit to

periods and relating to the discount rate and expected

future salary increases.

This accounting standard and the guidance for (a) and (b)

above are effective for the end of annual periods beginning

on or after April 1, 2013, and for (c) above are effective for

the beginning of annual periods beginning on or after April

1, 2014, or for the beginning of annual periods beginning

on or after April 1, 2015, subject to certain disclosure in

March 2015, both with earlier application being permitted

from the beginning of annual periods beginning on or after

April 1, 2013. However, no retrospective application of this

accounting standard to consolidated financial statements in

prior periods is required.

The Company applied the revised accounting standard

for (a) and (b) above effective April 1, 2013, and expects to

apply (c) above from April 1, 2014. The effects of applying

the revised accounting standard for (c) above in future

applicable periods are immaterial.

Accounting Standards for Business Combinations and Consolidated Financial Statements —On September 13,

2013, the ASBJ issued revised ASBJ Statement No. 21,

“Accounting Standard for Business Combinations,” revised

ASBJ Guidance No. 10, “Guidance on Accounting Standards

for Business Combinations and Business Divestitures,” and

revised ASBJ Statement No. 22, “Accounting Standard for

Consolidated Financial Statements.”

Major changes are as follows:

Transactions with noncontrolling interest—A parent’s

ownership interest in a subsidiary might change if the

parent purchases or sells ownership interests in its

subsidiary. The carrying amount of minority interest is

adjusted to reflect the change in the parent’s ownership

interest in its subsidiary while the parent retains its

controlling interest in its subsidiary. Under the current

accounting standard, any difference between the fair value

of the consideration received or paid and the amount

by which the minority interest is adjusted is accounted

for as an adjustment of goodwill or as profit or loss in

the consolidated statement of income. Under the revised

accounting standard, such difference shall be accounted for

as capital surplus as long as the parent retains control over

its subsidiary.

Presentation of the consolidated balance sheet—

In the consolidated balance sheet, “minority interest”

under the current accounting standard will be changed

to “noncontrolling interest” under the revised accounting

standard.

Presentation of the consolidated statement of income—

In the consolidated statement of income, “income before

minority interest” under the current accounting standard

will be changed to ”net income” under the revised

accounting standard, and “net income” under the current

accounting standard will be changed to “net income

attributable to owners of the parent” under the revised

accounting standard.

Provisional accounting treatments for a business

combination—If the initial accounting for a business

combination is incomplete by the end of the reporting

period in which the business combination occurs, an

acquirer shall report in its financial statements provisioned

amounts for the items for which the accounting is

incomplete. Under the current accounting standard

guidance, the impact of adjustments to provisional amounts

recorded in a business combination on profit or loss

are recognized as profit or loss in the year in which the

measurement is completed. Under the revised accounting

standard guidance, during the measurement period,

which shall not exceed one year from the acquisition,

the acquirer shall retrospectively adjust the provisional

amounts recognized at the acquisition date to reflect new

information obtained about facts and circumstances that

existed as of the acquisition date and that would have

affected the measurement of the amounts recognized as

of that date. Such adjustments shall be recognized as if

the accounting for the business combination had been

completed at the acquisition date.

Acquisition-related costs—Acquisition-related costs are

costs, such as advisory fees or professional fees, which

an acquirer incurs to effect a business combination. Under

the current accounting standard, the acquirer accounts

for acquisition-related costs by including them in the

acquisition costs of the investment. Under the revised

accounting standard, acquisition-related costs shall be

accounted for as expenses in the periods in which the costs

are incurred.

The above accounting standards and guidance for

“transactions with noncontrolling interest”, “acquisition-

related costs” and “presentation changes in the

consolidated financial statements” are effective for the

beginning of annual periods beginning on or after April 1,

2015. Earlier application is permitted from the beginning of

annual periods beginning on or after April 1, 2014, except

for the presentation changes in the consolidated financial

statements. In case of earlier application, all accounting

standards and guidance above, except for the presentation

changes, should be applied simultaneously. Either

retrospective or prospective application of the revised

accounting standards and guidance for “transactions

with noncontrolling interest” and “acquisition-related

costs” is permitted. In retrospective application of the

revised standards and guidance for “transactions with

noncontrolling interest” and “acquisition-related costs”,

accumulated effects of retrospective adjustments for all

“transactions with noncontrolling interest” and “acquisition-

related costs” which occurred in the past shall be reflected

as adjustments to the beginning balance of capital surplus

and retained earnings for the year of the first-time

application.

In prospective application, the new standards and

guidance for “transactions with noncontrolling interest” and

“acquisition-related costs” shall be applied prospectively

from the beginning of the year of the first-time application.

The changes in presentation shall be applied to all periods

presented in financial statements containing the first-time

application of the revised standards and guidance.

The revised standards and guidance for “provisional

accounting treatments for a business combination” is

effective for a business combination which will occur on or

after the beginning of annual periods beginning on or after

April 1, 2015. Earlier application is permitted for a business

combination which will occur on or after the beginning of

annual periods beginning on or after April 1, 2014.

The Company expects to apply the revised accounting

standards and guidance from the beginning of the annual

period beginning on April 1, 2015, and is in the process of

measuring the effects of applying the revised accounting

standards and guidance in future applicable periods.

Business combination by the acquisition method

Effective July 29, 2013, the Company acquired 100% of

the shares of Geveke B.V. located in the Netherlands and

its subsidiaries, manufacturing and trading companies of

systemized engineering packages incorporating industrial

specialty pumps and compressors, and technical solutions

services for a purchase price of ¥7,408 million ($72,632

thousand). This acquisition was made to diversify the

products and service of Industrial business by providing

advanced solution business with the integration of pump

technologies of the Company and packaging technologies of

3. BUSINESS COMBINATION

Geveke B.V. and adding packaging products of compressor

to the product lineup. The results of operations for Geveke

B.V. are included in the Company’s consolidated statement

of income from August 1, 2013. The Company accounted for

the acquisition of Geveke B.V. by the purchase method and

accordingly, the total cost of acquisition has been allocated

to the assets acquired and the liabilities assumed based on

their respective fair values. The amount of consideration

paid in excess of the estimated fair value of the net assets

acquired of ¥4,695 million ($46,035 thousand) has been

recorded as goodwill and amortized over 10 years.

The estimated fair values of the assets acquired and the liabilities assumed at the acquisition date are as follows:

Millions of YenThousands of U.S.

Dollars

Current assets ¥2,406 $23,585

Non-current assets 4,421 43,348

Total ¥6,827 $66,933

Current liabilities ¥3,027 $29,680

Long-term liabilities 1,078 10,566

Total ¥4,105 $40,246

The estimated fair values of the assets allocated to intangible fixes assets other than goodwill are as follows:


Dollars

Trade name ¥ 589 $ 5,770

Customer relationships 3,722 36,492

Total ¥4,311 $42,262

Financial Section


Short-term investments as of March 31, 2014 and 2013, consisted of the following:

4. SHORT-TERM INVESTMENTS


Dollars

2014 2013 2014Time deposits ¥490 ¥1,094 $4,807

(1) Outline of the transaction

i. Names and businesses of companies involved in merger

Nikkiso Co., Ltd. (surviving company) –Production,

sales and maintenance of industrial pumps, water

conditioning equipment, medical equipment and carbon

fiber reinforced plastics

Nikkiso Ryuki Techno Co., Ltd. (merged company) –

Technical service of pumps equipment

Nikkiso Technica Co., Ltd. (merged company) - Technical

service and construction of pumps and system

equipment

Nikkiso Tohoku Medical Co., Ltd. (merged company) –

Sale and maintenance of medical equipment in Tohoku

area

ii. Method of corporate merger

An absorption-type merger in which Nikkiso Co., Ltd. is

the surviving company.

iii. Name of post-merger entity

Nikkiso Co., Ltd.

iv. Overview of transaction

This merger makes clear the roles of those companies

involved: Nikkiso Ryuki Techno Co., Ltd. and Nikkiso

Technica Co., Ltd. handle service functions of the

Industrial Division and Nikkiso Tohoku Medical Co., Ltd.

handles sales and maintenance functions of the Medical

Division in Tohoku area. The purpose of this transaction

is to enhance the efficiency of the Group management

and improvement of sales and maintenance functions.

(2) Overview of accounting method used

Based on ASBJ Statement No. 21, “Accounting Standard for

Business Combinations,” and ASBJ Guidance

No. 10, “Guidance for Accounting Standard for Business

Combinations and Business Divestitures,” it is accounted

for as a business combination under common control.

Investment securities as of March 31, 2014 and 2013, consisted of the following:


Dollars

2014 2013 2014Non-current:

Equity securities ¥11,692 ¥9,312 $114,632

Trust fund investments and other 51 37 497

Total ¥11,743 ¥9,349 $115,129

The carrying amounts and aggregate fair values of investment securities as of March 31, 2014 and 2013, were as follows:

Millions of Yen

March 31, 2014 Cost Unrealized Gains Unrealized Losses Fair Value

Securities classified as:

Available-for-sale:

Equity securities ¥5,278 ¥6,495 ¥297 ¥11,476

Millions of Yen



Available-for-sale:

Equity securities ¥5,437 ¥4,363 ¥521 ¥9,279

Thousands of U.S. Dollars



Available-for-sale:

Equity securities $51,750 $63,674 $2,915 $112,509

The impairment losses on available-for-sale equity securities for the years ended March 31, 2014 and 2013, were ¥156

million ($1,534 thousand) and ¥52 million, respectively.

5. INVESTMENT SECURITIES

If the business acquisition had been completed as of April 1, 2013, the beginning of the current fiscal year, the unaudited

estimated impact on the consolidated financial statement of income for the year ended March 31, 2014 would be as follows:


Dollars

Sales ¥4,534 $44,447

Operating loss (317) (3,112)

Loss before Income taxes and minority interests (408) (4,004)

Net loss (396) (3,882)

Business combination under common control

The Company merged with Nikkiso Ryuki Techno Co., Ltd.; Nikkiso Technica Co., Ltd.; and Nikkiso Tohoku Medical Co., Ltd.,

which were consolidated subsidiaries, effective October 1, 2013.

Financial Section


Inventories as of March 31, 2014 and 2013, consisted of the following:


Dollars

2014 2013 2014Merchandise ¥ 3,662 ¥ 2,960 $ 35,900

Finished products 4,230 2,882 41,469

Work in process 6,249 5,584 61,264

Raw materials and supplies 7,554 7,945 74,066

Total ¥21,695 ¥19,371 $212,699

6. INVENTORIES

The Group reviewed its long-lived assets for impairment as of the year ended March 31, 2014 and, as a result, recognized an

impairment loss of ¥334 million ($3,278 thousand) as other expense for goodwill of an European subsidiary due to selling

plan of a part of its business, and the carrying amount was written down to the recoverable amount. No impairment loss

was recognized in 2013.

7. LONG-LIVED ASSETS

8. SHORT-TERM BANK LOANS AND LONG-TERM DEBT

Short-term bank loans at March 31, 2014 and 2013, consisted of notes to banks, with weighted-average interest rates of 0.84%

and 0.77%, respectively.

Long-term debt as of March 31, 2014 and 2013, consisted of the following:


Dollars

2014 2013 2014Unsecured loans from banks and other financial institutions due

serially to 2020 with interest rates of Tokyo Interbank Offered Rate plus a certain spread ranging from 0.51% to 3.95% (2014) and from 0.51% to 3.95% (2013) ¥33,174 ¥41,603 $325,238

Unsecured convertible bonds, due 2018 15,130 148,333

Lease obligations 135 208 1,322

Total 48,439 41,811 474,893

Less current portion (5,725) (11,211) (56,132)

Long-term debt, less current portion ¥42,714 ¥30,600 $418,761

Annual maturities of long-term debt as of March 31, 2014, were as follows:

Years ending March 31 Millions of YenThousands of U.S.

Dollars

2015 ¥ 5,725 $ 56,132

2016 7,998 78,417

2017 2,352 23,056

2018 7,541 73,927

2019 17,266 169,277

2020 and thereafter 7,557 74,084

Total ¥48,439 $474,893

The company has issued the convertible bonds as follows:

Issuance date Interest rate Security Maturity date

Convertible bonds due in 2018 August 2, 2013 Unsecured August 2, 2018

The details of convertible bonds issued are as follows:

Convertible bonds due in 2018

Type of stock to be issued Common stock

Issue price of acquisition rights No cost

Issue price of stock ¥1,615

Number of stocks subject to acquisition rights 9,287,925

Total amount of issue ¥15,150,000,000

Total amount of stock acquisition rights exercised

Percentage of stock acquisition rights granted 100.0%

Exercisable period August 16, 2013 – July 19, 2018

(Luxemburg time)

The carrying amounts of assets pledged as collateral for bank loans of ¥6,121 million ($60,009 thousand) as of March 31,

2014, were as follows:


Dollars

Cash and cash equivalents ¥ 158 $ 1,554

Land 95 929

Buildings and structures 2,348 23,016

Machinery and equipment 282 2,763

Total ¥2,883 $28,262

In addition, the consolidated subsidiary shares of ¥24,141 million ($236,674 thousand) before elimination under consolidation

are pledged at March 31, 2014.

General agreements with respective banks provide, as is customary in Japan, that additional collateral must be provided

under certain circumstances if requested by such banks and that certain banks have the right to offset cash deposited

with them against any long-term or short-term debt or obligation that becomes due and, in the case of default and certain

other specified events, against all other debt payable to the banks. The Company has never been requested to provide any

additional collateral.

Financial Section


9. EMPLOYEES’ RETIREMENT AND PENSION PLANS

The Company has non-contributory defined benefit plans

(cash balance plan) for employees. Certain consolidated

subsidiaries have non-contributory defined benefit plans

and defined contribution pension plans.

Under most circumstances, employees terminating their

employment are entitled to retirement benefits determined

based on the rate of pay at the time of termination, years

of service and certain other factors. Such retirement

benefits are made in the form of a lump-sum severance

payment from the Company or consolidated subsidiaries,

and annuity payments from a trustee. Employees

are entitled to larger payments if the termination is

involuntary, by retirement at the mandatory retirement

age, by death, or by voluntary retirement at certain

specific ages prior to the mandatory retirement age.

Year ended March 31, 2014

1. The changes in defined benefit obligation for the year ended March 31, 2014, were as follows:


Dollars

2014Balance at beginning of year ¥17,445 $171,028

Current service cost 580 5,688

Interest cost 272 2,666

Actuarial gains and losses 302 2,960

Benefits paid (1,030) (10,094)

Others 50 493

Balance at end of year ¥17,619 $172,741

2. The changes in plan assets for the year ended March 31, 2014, were as follows:


Dollars

2014Balance at beginning of year ¥14,357 $140,757

Expected return on plan assets 287 2,815

Actuarial gains and losses 155 1,522

Contributions from the employer 824 8,071

Benefits paid (1,030) (10,094)

Balance at end of year ¥14,593 $143,071

3. Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit

obligation and plan assets:


Dollars

2014Funded defined benefit obligation ¥ 17,619 $ 172,741

Plan assets (14,593) (143,071)

3,026 29,670

Unfunded defined benefit obligation

Net liability (asset) arising from defined benefit obligation ¥ 3,026 $ 29,670

4. The components of net periodic benefit costs for the year ended March 31, 2014, were as follows:


Dollars

2014Service cost ¥ 580 $ 5,688

Interest cost 272 2,666

Expected return on plan assets (287) (2,815)

Recognized actuarial losses 505 4,950

Amortization of prior service cost (168) (1,644)

Others 1 13

Net periodic benefit costs ¥ 903 $ 8,858

5. Accumulated other comprehensive income on defined retirement benefit plans as of March 31, 2014


Dollars

2014Unrecognized prior service cost ¥ 545 $ 5,348

Unrecognized actuarial gains and losses (3,107) (30,467)

Total ¥(2,562) $(25,119)

6. Plan assets

(1) Components of plan assets

Plan assets consisted of the following:

2014Debt investments 68%

Equity investments 12%

Cash and cash equivalents 1%

Others 19%

Total 100%

(2) Method of determining the expected rate of return on plan assets

The expected rate of return on plan assets is determined considering the long-term rates of return which are expected

currently and in the future from the various components of the plan assets.

Financial Section


10. EQUITY

Japanese companies are subject to the Companies Act of

Japan (the “Companies Act”). The significant provisions

in the Companies Act that affect financial and accounting

matters are summarized below:

(a) DividendsUnder the Companies Act, companies can pay dividends

at any time during the fiscal year in addition to the

year-end dividend upon resolution at the shareholders’

meeting. For companies that meet certain criteria such as

(1) having a Board of Directors, (2) having independent

auditors, (3) having an Audit & Supervisory Board, and (4)

the term of service of the directors is prescribed as one

year rather than two years of normal term by its articles

of incorporation, the Board of Directors may declare

dividends (except for dividends-in-kind) at any time during

the fiscal year if the company has prescribed so in its

articles of incorporation. The Company meets all the above

criteria.

The Companies Act permits companies to distribute

dividends-in-kind (noncash assets) to shareholders subject

to a certain limitation and additional requirements.

Semiannual interim dividends may also be paid once

a year upon resolution by the Board of Directors if the

articles of incorporation of the company so stipulate. The

Companies Act provides certain limitations on the amounts

available for dividends or the purchase of treasury stock.

The limitation is defined as the amount available for

distribution to the shareholders, but the amount of net

assets after dividends must be maintained at no less than

¥3 million.

(b) Increases / Decreases and Transfer of Common Stock, Reserve and Surplus

The Companies Act requires that an amount equal to 10%

of dividends must be appropriated as a legal reserve (a

component of retained earnings) or as additional paid-

in capital (a component of capital surplus), depending on

the equity account charged upon the payment of such

dividends, until the total aggregate amount of the legal

reserve and additional paid-in capital equals 25% of

the common stock. Under the Companies Act, the total

amount of additional paid-in capital and legal reserve

may be reversed without limitation. The Companies Act

also provides that common stock, legal reserve, additional

paid-in capital, other capital surplus and retained earnings

can be transferred among the accounts under certain

conditions upon resolution of the shareholders.

(c) Treasury Stock and Treasury Stock Acquisition Rights

The Companies Act also provides for companies to

purchase treasury stock and dispose of such treasury

stock by resolution of the Board of Directors. The amount

of treasury stock purchased cannot exceed the amount

available for distribution to the shareholders which is

determined by a specific formula.

Under the Companies Act, stock subscription rights

are presented as a separate component of equity. The

Companies Act also provides that companies can purchase

both treasury stock acquisition rights and treasury stock.

Such treasury stock acquisition rights are presented as a

separate component of equity or deducted directly from

stock acquisition rights.

7. Assumptions used for the year ended March 31, 2014, were set forth as follows:

2014Discount rate 1.6%

Expected rate of return on plan assets 2.0%

Year ended March 31, 2013

The liability for employees’ retirement benefits at March 31, 2013, consisted of the following:

Millions of Yen

2013Projected benefit obligation ¥ 17,445

Fair value of plan assets (14,357)

Unrecognized prior service cost 713

Unrecognized actuarial loss (3,466)

Prepaid pension expense 111

Net liability ¥ 446

The components of net periodic retirement benefit costs for the year ended March 31, 2013, were as follows:

Millions of Yen

2013Service cost ¥ 496

Interest cost 368

Expected return on plan assets (271)

Recognized actuarial loss 691

Amortization of prior service cost (192)

Net periodic benefit costs ¥1,092

Assumptions used for the year ended March 31, 2013, are set forth as follows:

2013Discount rate 1.6%

Expected rate of return on plan assets 2.0%

Amortization period of prior service cost 10 years

Recognition period of actuarial gain / loss 10 years

Financial Section


The stock options outstanding as of March 31, 2014, are as follows:

Stock Option Persons Granted Number of Options granted Date of Grant Exercise Price Exercise Period

2012 Stock Option 6 directors 20,000 shares July 18, 2012 ¥1 From July 19, 2012 to July 18, 2042

2013 Stock Option 6 directors 20,000 shares July 18, 2013 ¥1 From July 19, 2013 to July 18, 2043

The stock option activity is as follows:

2012 Stock Option 2013 Stock Option

For the year ended March31, 2013 (Shares) (Shares)

Non-vested

April 1, 2012 – Outstanding

Granted 20,000

Canceled

Vested

March 31, 2013 – Outstanding 20,000

Vested

April 1, 2012 – Outstanding

Vested

Exercised

Canceled

March 31, 2013 – Outstanding

For the year ended March31, 2014

Non-vested

March 31, 2013 – Outstanding 20,000

Granted 20,000

Canceled 2,000

Vested 5,000 1,000

March 31, 2014 – Outstanding 15,000 17,000

Vested


Vested 5,000 1,000

Exercised 5,000 1,000

Canceled


Exercise price ¥ 1 ¥ 1

($0.0) ($0.0)

Average stock price at exercise ¥1,285 ¥1,229

($13) ($12)

Fair value price at grant date ¥722 thousand ¥1,128 thousand

($7,081) ($11,059)

The assumptions used to measure fair value of 2013 Stock Option Estimate method: Black-Scholes option pricing model

Volatility of stock price: 34%

Estimated remaining outstanding period: 15 years

Estimated dividend: ¥13 per share

Risk free interest rate: 1.27%

11. STOCK OPTIONS 12. INCOME TAXES

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate,

resulted in normal effective statutory tax rates of approximately 38.0% for the year ended March 31, 2014, and 2013.

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets

and liabilities as of March 31, 2014 and 2013, were as follows:


Dollars

2014 2013 2014Deferred tax assets:

Inventories ¥ 570 ¥ 430 $ 5,590

Accrued bonuses to employees 651 675 6,383

Accrued business taxes 115 151 1,129

Tax loss carryforwards 125 84 1,222

Investment securities 102 102 1,000

Liability for employees' retirement benefits 919 35 9,012

Others 642 763 6,294

Less valuation allowance (141) (127) (1,385)

Total ¥ 2,983 ¥2,113 $29,245

Deferred tax liabilities:

Unrealized gain on available-for-sale securities ¥ 2,209 ¥1,369 21,654

Reserve for deferred income on fixed assets 1,171 227 11,481

Prepaid pension expense 40

Others 1,514 1,059 14,846

Total ¥ 4,894 ¥2,695 $ 47,981

Net deferred tax assets ¥(1,911) ¥ (582) $(18,736)

A reconciliation of the difference between the effective statutory tax rate and the actual effective tax rate for the year

ended March 31, 2014, was as follows:

2014Effective statutory tax rate 38.0%

Expenses not deductible for income tax purposes 0.7

Inhabitants’ tax-per capita levy 0.6

Dividend income, non-taxable (0.3)

Tax credit for research and development costs of domestic companies (1.6)

Equity in earnings of affiliated companies (0.7)

Variance of tax rate for consolidated subsidiaries (6.0)

Increase in valuation allowance 1.6

Amortization of goodwill 6.6

Income taxes for prior periods 0.8

Change of effective statutory tax rate 0.6

Others, net 1.5

Actual effective tax rate 41.8%

The reconciliation of difference between the effective statutory tax rate and the actual effective tax rate for the year ended

March 31, 2013, was not disclosed since the difference is less than 5% of the normal effective statutory tax rate.

New tax reform laws enacted in 2014 in Japan changed the normal effective statutory tax rate for the fiscal year

beginning on or after April 1, 2014 from approximately 38.0% to 35.6%. The effect of this change was to decrease deferred

Financial Section


Research and development costs charged to income were ¥1,889 million ($18,521 thousand) and ¥1,434 million for the years

ended March 31, 2014 and 2013, respectively.

The Group acquired Geveke B.V. and its consolidated subsidiaries during the year ended March 31, 2014.

Assets acquired and liabilities assumed in the merger of Geveke B.V. were as follows:


Dollars

Current assets ¥2,406 $23,585

Non-current assets 4,421 43,348

Goodwill 4,695 46,035

Current liabilities (3,027) (29,680)

Long-term liabilities (1,078) (10,566)

Minority interests (9) (90)

Cash paid for the shares ¥7,408 $72,632

Cash and cash equivalents of consolidated subsidiary (139) (1,363)

Payment for acquisition of shares of newly consolidated subsidiary, net of cash and cash equivalents acquired ¥7,269 $71,269

The Group leases certain machinery, computer equipment, office space and other assets.

Total lease and rental expenses for the years ended March 31, 2014 and 2013, were ¥2,021 million ($19,813 thousand)

and ¥1,648 million, respectively.

14. RESEARCH AND DEVELOPMENT COSTS

13. SUPPLEMENTAL CASH FLOW INFORMATION

15. LEASES

tax assets in the consolidated balance sheet as of March 31, 2014 by ¥65 million ($637 thousand) and to increase income

taxes-deferred in the consolidated statement of income for the year then ended by ¥65 million ($637 thousand).

As of March 31, 2014, certain subsidiaries have tax loss carryforwards aggregating to approximately ¥686 million

($6,722 thousand) which are available to be offset against taxable income of such subsidiaries in future years. The tax loss

carryforwards do not have an expiration date.

On September 3, 2012, the Company’s Board of Directors decided to relocate most of its production capability of medical

equipment and aircraft parts in Shizuoka plant to Kanazawa plant. The relocation is scheduled to be completed by March

2015. The total allowance for loss on such factory restructuring for the years ended March 31, 2014 and 2013, were ¥133

million ($1,307 thousand) and ¥177 million, respectively.

17. LOSS ON FACTORY RESTRUCTURING

Total amortization of goodwill for the years ended March 31, 2014 and 2013, were ¥1,786 million ($17,509 thousand) and

¥1,499 million, respectively.

16. AMORTIZATION OF GOODWILL

18. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

(1) Group Policy for Financial InstrumentsThe Group uses financial instruments, mainly bank loans

and bonds, based on its capital investment plan. Cash

surpluses, if any, are invested in low risk financial assets.

Short-term bank loans are used to fund its ongoing

operations. Derivatives are used, not for speculative

purposes, but to manage exposure to financial risks as

described in (2) below.

(2) Nature and Extent of Risks Arising from Financial Instruments

Receivables, such as trade notes and trade accounts are

exposed to customer credit risk. Although receivables

in foreign currencies are exposed to the market risk of

fluctuation in foreign currency exchange rates, the position,

net of payables in foreign currencies, is hedged by using

forward foreign currency contracts. Marketable and

investment securities are exposed to the risk of market

price fluctuations.

Payment terms of payables, such as trade notes and

trade accounts, are less than one year. Although payables

in foreign currencies are exposed to the market risk of

fluctuation in foreign currency exchange rates, those risks

are netted against the balance of receivables denominated

in the same foreign currency as noted above.

Maturities of bank loans and convertible bonds are less

than six years and three months after the balance sheet

date. Although a part of such bank loans are exposed to

market risks from changes in variable interest rates and

foreign currency exchange rates, those risks are mitigated

by using derivatives of interest rate swaps and interest

rate and currency swap.

(3) Risk Management for Financial Instruments

Credit risk managementCredit risk is the risk of economic loss arising from a

counterparty’s failure to repay or service debt according to

the contractual terms. The Group manages its credit risk

from receivables on the basis of internal guidelines, which

include monitoring of payment terms and balances of major

customers by each business division to identify the default

risk of customers at an early stage. Counterparties to the

derivatives are limited to major international financial

institutions to reduce counterparty risk.

The maximum credit risk exposure of financial assets is

limited to their carrying amounts as of March 31, 2014.

Market risk management (foreign exchange risk and interest rate risk)Foreign currency trade receivables and payables are

exposed to market risk resulting from fluctuations in

foreign currency exchange rates. The Company and certain

consolidated subsidiaries manage to hedge such risk

principally by forward foreign currency contracts.

Interest rate swaps and interest rate and currency

swap are used by the Company and certain consolidated

subsidiaries to manage exposure to market risks from

changes in interest rates and foreign currency exchange

rate of loan payables.

Investment securities are managed by monitoring

market values and financial position of issuers on a regular

basis.

In accordance with internal policies for derivative

transactions which regulate the authorization and credit

limit amount, transacrion, recording and reconciliation of

the transactions and balances with customers are made by

the finance department.

Liquidity risk managementLiquidity risk comprises the risk that the Company cannot

meet its contractual obligations in full on their maturity

dates. The Company manages its liquidity risk by adequate

financial planning based on reports from each department.

(4) Fair Values of Financial InstrumentsFair values of financial instruments are based on quoted

prices in active markets. If a quoted price is not available,

other rational valuation techniques are used instead.

Also, please see Note 19 for the details of fair value for

derivatives. The contract amount shown in Note 19 is not

the amount of derivative transactions exposed to market

risk.

Financial Section


(a) Fair value of financial instruments

Millions of Yen

March 31, 2014 Carrying amount Fair value Unrealized gain (loss)

Cash and cash equivalents ¥19,238 ¥19,238

Notes and accounts receivable

Trade 40,157 40,157

Investment securities

Equity securities 11,476 11,476

Total ¥70,871 ¥70,871

Short-term bank loans ¥ 8,433 ¥ 8,433

Notes and accounts payable

Trade 16,990 16,990

Construction and other 2,918 2,918

Income taxes payable 2,253 2,253

Long-term debt 48,439 49,410 ¥(971)

Total ¥79,033 ¥80,004 ¥(971)

Millions of Yen


Cash and cash equivalents ¥25,556 ¥25,556


Trade 32,673 32,673



Total ¥67,508 ¥67,508

Short-term bank loans ¥ 8,242 ¥ 8,242


Trade 14,604 14,604



Long-term debt 41,811 41,989 ¥(178)

Total ¥69,728 ¥69,906 ¥(178)

Thousands of U.S.Dollars


Cash and cash equivalents $188,608 $188,608


Trade 393,698 393,698



Total $694,815 $694,815

Short-term bank loans $ 82,680 $ 82,680


Trade 166,568 166,568



Long-term debt 474,893 484,413 $(9,520)

Total $774,830 $784,350 $(9,520)

Cash and cash equivalentsThe carrying values of cash and cash equivalents approximate fair value because of their short maturities.

Investment securitiesThe fair values of investment securities are measured at the quoted market price of the stock exchange for the equity instruments, and at the quoted price obtained from the financial institution for certain debt instruments. Fair value information for investment securities by classification is included in Note 5.

Receivables and payablesThe carrying values of receivables and payables approximate fair value because of their short maturities.

Short-term bank loans The carrying values of short-term bank loans approximate fair value because of their short maturities.

Long- term debtThe fair values of long-term debt are determined by discounting the cash flows related to the debt at the Group’s assumed corporate borrowing rate. The fair value of bonds issued by the Company is measured at the quoted market price.

DerivativesFair value information for derivatives is included in Note 19.

(b) Financial instruments whose fair value cannot be reliably determined


Dollars

2014 2013 2014Investments in equity instruments that do not have a quoted market price in an active market ¥1,357 ¥919 $13,313

Trust fund investments and other 51 37 497

Total ¥1,408 ¥956 $13,810

(c) Maturity analysis for financial assets and securities with contractual maturities

Millions of Yen

March 31, 2014Due in one year

or less

Due after one year through five

years

Due after five years through ten

years

Due after ten years

Cash and cash equivalents ¥19,238


Trade 40,157

Total ¥59,395


March 31, 2014Due in one year

or less

Due after one year through five

years

Due after five years through ten

years

Due after ten years

Cash and cash equivalents $188,608


Trade 393,698

Total $582,306

(d) Maturity analysis for corporate bond, long-term loan and debt with interest with contractual maturities

See Note 8 for annual maturities of long-term debt.

Financial Section


19. DERIVATIVES

The Group enters into foreign currency forward contracts

to hedge foreign exchange risk associated with certain

assets and liabilities denominated in foreign currencies.

The Group also enters into interest rate swap contracts and

interest rate and currency swap to manage its interest rate

and foreign currency exposures on certain liabilities.

All derivative transactions are entered into to hedge

interest and foreign currency exposures incorporated

within the Group’s business. Accordingly, market risk

in these derivatives is basically offset by opposite

movements in the value of hedged assets or liabilities.

Because the counterparties to these derivatives are

limited to major international financial institutions, the

Group does not anticipate any losses arising from credit

risk.

Derivative transactions entered into by the Company

have been made in accordance with internal policies which

regulate the authorization and the credit limit amount.

Derivative transactions to which hedge accounting is not applied

Millions of Yen

March 31, 2014Contract Amount

Contract Amount Due after One

YearFair Value Unrealized Gain

(Loss)

Foreign currency forward contracts:

Selling EUR ¥ 141 ¥ (1) ¥ (1)

Selling U.S.$ 157 2 2

Buying U.S.$ 561 15 15

Interest rate swaps: (fixed rate payment, floating rate receipt) 3,531 (28) (28)

Option trading: (interest rate cap) 2,872 ¥2,611 0 0

Millions of Yen




(Loss)


Selling EUR ¥ 215 ¥ (26) ¥ (26)

Selling U.S.$ 25 1 1

Interest rate swaps: (fixed rate payment, floating rate receipt) 3,750 ¥3,203 (101) (101)

Option trading: (interest rate cap) 1,428 1,239 1 1





(Loss)


Selling EUR $ 1,383 $ (5) $ (5)

Selling U.S.$ 1,539 18 18

Buying U.S.$ 5,503 146 146

Interest rate swaps: (fixed rate payment, floating rate receipt) 34,616 (279) (279)

Option trading: (interest rate cap) 28,157 $25,597 3 3

Derivative transactions to which hedge accounting is applied

Millions of Yen

March 31, 2014Hedged item Contract Amount


YearFair Value

Interest rate swaps: (fixed rate payment, floating rate receipt) Long-term debt ¥14,467 ¥14,045 ¥(178)

Interest rate and currency swap (fixed rate payment, floating rate receipt) (U.S.$ payment, Japanese Yen receipt)

Long-term debt 2,500 2,500 199

Millions of Yen



YearFair Value

Interest rate swaps: (fixed rate payment, floating rate receipt) Long-term debt ¥22,051 ¥14,040 ¥(335)


Long-term debt 2,500 2,500 (71)




YearFair Value

Interest rate swaps: (fixed rate payment, floating rate receipt) Long-term debt $141,837 $137,693 $(1,744)


Long-term debt 24,510 24,510 1,947

The fair value of derivative transactions is measured at the quoted price obtained from the financial institution.

The contract or notional amounts of derivatives which are shown in the above table do not represent the amounts

exchanged by the parties and do not measure the Group’s exposure to credit or market risk.

The components of other comprehensive income for the years ended March 31, 2014 and 2013, were as follows:


Dollars

2014 2013 2014Unrealized gain on available-for-sale securities:

Gains arising during the year ¥2,199 ¥1,209 $21,558

Reclassification adjustments to profit 156 52 1,534

Amount before income tax effect 2,355 1,261 23,092

Income tax effect (839) (449) (8,230)

Total ¥1,516 ¥ 812 $14,862

Foreign currency translation adjustments:

Adjustments arising during the year ¥3,997 ¥1,157 $39,181

Share of other comprehensive income in associates:

Gains arising during the year ¥ 166 ¥ 85 $ 1,631

Total other comprehensive income ¥5,679 ¥2,054 $55,674

20. COMPREHENSIVE INCOME

Financial Section


Appropriations of Retained EarningsThe Company’s Board of Directors approved the following at the Board of Directors’ meeting held on May 16, 2014:


Dollars

Year-end cash dividends, ¥8.00 ($0.08) per share ¥617 $6,049

22. SUBSEQUENT EVENT

23. SEGMENT INFORMATION

Under ASBJ Statement No. 17, “Accounting Standard for

Segment Information Disclosures,” and ASBJ Guidance

No. 20 ,“Guidance on Accounting Standard for Segment

Information Disclosures,” an entity is required to report

financial and descriptive information about its reportable

segments. Reportable segments are operating segments

or aggregations of operating segments that meet specified

criteria. Operating segments are components of an entity

about which separate financial information is available

and such information is evaluated regularly by the chief

operating decision maker in deciding how to allocate

resources and in assessing performance. Generally,

segment information is required to be reported on the

same basis as is used internally for evaluating operating

segment performance and deciding how to allocate

resources to operating segments.

Reconciliation of the differences between basic and diluted EPS for the years ended March 31, 2014 and 2013, is as follows:

Millions of Yen Thousands of shares Yen U.S. Dollars

Net income Weighted average shares EPS

For the year ended March 31, 2014:

Basic EPS

Net income available to common shareholders ¥5,897 77,130 ¥76.46 $0.75

Effect of Dilutive Securities

Stock acquisition rights 6,188

Diluted EPS

Net income for computation ¥5,897 83,318 ¥70.78 $0.69

For the year ended March 31, 2013:

Basic EPS

Net income available to common shareholders ¥6,898 77,144 ¥89.41

Effect of Dilutive Securities

Stock acquisition rights 14

Diluted EPS

Net income for computation ¥6,898 77,158 ¥89.40

21. NET INCOME PER SHARE2. Methods of measurement for the amounts of sales, profit (loss), assets and other items for each reportable segment

The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of Significant

Accounting Policies”.

3. Information about sales, profit, assets and other items.

Millions of Yen

Reportable segment

March 31, 2014Industrial Business

Medical Business Total Reconciliations Consolidated

Sales:

Sales to external customers ¥68,589 ¥52,960 ¥121,549 ¥121,549

Segment profit 5,103 7,846 12,949 (3,525) 9,424

Segment assets 95,288 36,126 131,414 29,870 161,284

Other:

Depreciation 1,962 1,294 3,256 196 3,452

Amortization of goodwill 1,752 34 1,786 1,786

Investments in affiliated companies accounted for by the equity method 622 463 1,085 1,085

Loss on impairment of long-lived assets 334 334 334

Increase in property, plant and equipment and intangible assets 4,641 3,779 8,420 592 9,012

Millions of Yen

Reportable segment



Sales:

Sales to external customers ¥55,177 ¥48,493 ¥103,670 ¥103,670

Segment profit 3,770 6,962 10,732 (3,250) 7,482

Segment assets 74,696 30,321 105,017 33,328 138,345

Other:

Depreciation 1,304 1,308 2,612 229 2,841


Investments in affiliated companies accounted for by the equity method 533 297 830 830

Increase in property, plant and equipment and intangible assets 2,526 1,592 4,118 411 4,529


Reportable segment



Sales

Sales to external customers $672,437 $519,218 $1,191,655 $1,191,655

Segment profit 50,027 76,918 126,945 (34,557) 92,388

Segment assets 934,200 354,174 1,288,374 292,841 1,581,215

Other:

Depreciation 19,240 12,685 31,925 1,923 33,848


Investments in affiliated companies accounted for by the equity method 6,098 4,541 10,639 10,639

Loss on impairment of long-lived assets 3,278 3,278 3,278

Increase in property, plant and equipment and intangible assets 45,496 37,050 82,546 5,808 88,354

1. Description of reportable segments

The Group’s reportable segments are those for which separate financial information is available and regular evaluation by

the Company’s management is being performed in order to decide how resources are allocated among the Group. Therefore,

the Group’s reportable segments consist of the Industrial Business and the Medical Business.

The Industrial Business consists of production, sale, and maintenance of industrial pumps, water-conditioning equipment,

carbon-fiber reinforced plastics and other various industrial equipment.

The Medical Business consists of production, sale and maintenance of artificial kidney machines, dialyzers, blood tubing

and powder dialysate.

Financial Section


Other related information1. Information about geographical areas

(1) Sales

Millions of Yen

2014Japan Asia North America Europe Other Total

¥55,442 ¥21,060 ¥14,214 ¥27,158 ¥3,675 ¥121,549

Millions of Yen


¥53,630 ¥19,752 ¥10,397 ¥17,483 ¥2,408 ¥103,670



$543,545 $206,471 $139,356 $266,253 $36,030 $1,191,655

Note: Sales are classified in countries or regions based on location of customers.

(2) Property, plant and equipment

Millions of Yen


¥15,277 ¥ 7,141 ¥1,510 ¥3,109 ¥20 ¥27,057

Millions of Yen


¥12,460 ¥ 4,027 ¥886 ¥2,219 ¥19 ¥19,611



$149,772 $70,009 $14,800 $30,481 $196 $265,258

2. Information about major customers

The information is not disclosed since the sales amount for any individual customer is less than 10% of total consolidated

sales for the year ended March 31, 2014.

Information about the unamortized balance of goodwill as of March 31, 2014 and 2013

Millions of Yen

Reportable segment

Industrial Business

Medical Business Total Eliminations/

Corporate Consolidated

Goodwill at March 31, 2014 ¥25,472 ¥190 ¥25,662 ¥25,662

Millions of Yen

Reportable segment

Industrial Business



Goodwill at March 31, 2013 ¥21,906 ¥210 ¥22,116 ¥22,116


Reportable segment

Industrial Business



Goodwill at March 31, 2014 $249,728 $1,863 $251,591 $251,591

Financial Section

63Annual Report 201462 NIKKISO Co., Ltd.

Independent Auditor’s Report Corporate Information

President & Chief Executive Officer Toshihiko Kai

Directors & Senior Executive Officers Hiroshi Nakamura

Akira Nishiwaki

Hisashi Homma

Tsunehisa Suita

Outside Director Kenjiro Nakane

Audit & Supervisory Board Members Hatsuo Tashiro

Naoto Goto

Yutaro Kikuchi

Eisuke Nagatomo

Executive Officers Naota Shikano

Junichi Takeda

Shoichi Nagato

Nobuhiko Ban

Susumu Koito

Shotaro Fujii

Hiroshi Bamba

Company Name NIKKISO CO., LTD.

Date of Establishment December 26, 1953

Paid-in Capital ¥6,544,339,191

Number of Employees 6,198 (Consolidated)

1,627 (Non-Consolidated)

Authorized Number of Shares 249,500,000

Issued Number of Shares 80,286,464

(Contained Treasury Stocks) 3,163,543

Number of Shareholders 7,267

Japan Trustee Services Bank, Ltd. (Trust Account)

6,714 8.36%

The Master Trust Bank of Japan, Ltd. (Trust Account)

4,574 5.69

Mizuho Bank, Ltd. 3,779 4.70

Nikkiso Shareholders Association 2,328 2.90

Mitsui Sumitomo Insurance Co., Ltd. 1,966 2.44

Nikkiso Employee Shareholders Association

1,907 2.37

Nippon Life Insurance Company 1,650 2.05

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1,622 2.02

Sumitomo Mitsui Trust Bank, Limited

1,404 1.74

Resona Bank, Limited 1,215 1.51

Board of Directors and Auditors As of June 25, 2014

Executive OfficersAs of June 25, 2014

Corporate DataAs of March 31, 2014

Major ShareholdersNumber ofShares Held(Thousands)

Percent ofTotal SharesOutstanding


Offi ces and PlantsDomestic▶Head Offi ce4-20-3, Ebisu, Shibuya-ku,Tokyo 150-6022, JapanPhone: +81-3-3443-3711Fax: +81-3-3473-4963

Aerospace DivisionPhone: +81-3-3443-3734Fax: +81-3-3443-9863

Medical DivisionPhone: +81-3-3443-3727Fax: +81-3-3440-0681

Industrial DivisionIndustrial Sales Department2-27-10, Ebisu, Shibuya-ku,Tokyo 150-8677, JapanPhone: +81-3-3443-3726Fax: +81-3-3444-2438

Precision Equipment Business Unit2-16-2, Noguchi-cho, Higashimurayama,Tokyo 189-8520, JapanPhone: +81-42-390-3378Fax: +81-42-392-3355

▶PlantsHigashimurayama Plant2-16-2, Noguchi-cho, Higashimurayama,Tokyo 189-8520, JapanPhone: +81-42-392-3311Fax: +81-42-393-2201

Shizuoka Plant498-1, Shizutani, MakinoharaShizuoka 421-0496, JapanPhone: +81-548-22-5801Fax: +81-548-22-5886

Kanazawa Plant3-1, Hokuyohdai, Kanazawa,Ishikawa 920-0177, JapanPhone: +81-76-257-4181Fax: +81-76-257-4250

Subsidiaries & Affi liatesDomesticNikkiso Eiko Co., Ltd.Phone: +81-42-390-6540Fax: +81-42-390-6541Manufacture, sale and after-sales service of small type pumps, sand fi lters, etc.

Nikkiso-Therm Co., Ltd.Phone: +81-422-37-9811Fax: +81-422-37-9820Manufacture and sales of precision thermistors and thermistor-applied products.

Nikkiso Giken Co., Ltd.Phone: +81-42-392-3087Fax: +81-42-392-3134Sale of UV LEDs, and research and development of Nikkiso productsand manufacturing technology.

BEL Japan, Inc.Phone: +81-6-6841-2161Fax: +81-6-6841-2767Manufacture and sales of apparatus for powder and surface characterization.

OverseasNikkiso America, Inc.Suite 110, 5910 Pacifi c Center Boulevard,San Diego, CA 92121, U.S.A.Phone: +1-858-222-6300Fax: +1-858-222-6301Administration and management of business planning of the Company and its subsidiaries, as well as promotion and management of Nikkiso product businesses in North, Central and South America.

Nikkiso Cryo, Inc.4661 Eaker Street, North Las Vegas, NV 89081-2746, U.S.A.Phone: +1-702-643-4900Fax: +1-702-643-0391Service of testing and analysis of submergedcryogenic pumps and other cryogenic components and systems for liquefi ed gases.

Microtrac, Inc.215 Keystone Drive, Montgomeryville, PA 18936, U.S.A.Phone: +1-215-619-9920Fax: +1-215-619-9920Manufacture and sale of Microtrac particle sizeanalyzers for the powder fl uid industry.

Geveke B.V.Barajasweg 60, 1043 CP Amsterdam, NetherlandsPhone: +31-20-582-9111Fax: +31-20-686-1604Sales of industrial specialty pumps and compressors, production and sales of systemized engineering pump packages.

Nikkiso-KSB GmbHPhilipp-Reis-Strasse 13, 63486 Bruchkoebel, GermanyPhone: +49-6181-30010-0Fax: +49-6181-30010-99Manufacture, sale and after-sales service of pumps.

Nikkiso Europe GmbH(Head Offi ce)Desbrocksriede 1, D-30855 Langenhagen, GermanyPhone: +49-511-679999-0Fax: +49-511-679999-11(R&D Department)Beneckeallee 30, D-30419 Hannover, GermanyPhone: +49-511-679999-0Fax: +49-511-679999-266(Sales Department)Alte Landstraße 284, D-22391 Hamburg, GermanyPhone: +49-40-414629-0Fax: +49-40-414629-49Manufacture, sale and after-sales service of medical products (dialysis equipment, disposable products, etc.) in the European market.

Shanghai Nikkiso Non-Seal Pump Co., Ltd.19#-21# Zhenxian Industrial Park, Lane 18 East,Huancheng Road, Fengxian District, Shanghai201401, ChinaPhone: +86-21-6710-3258Fax: +86-21-6710-3250Manufacture, sale and after-sales service of Nikkiso canned motor pumps.

Shanghai Nikkiso Trading Corporation27F, Huamin Empire Plaza, 728 Yan An West Road, Shanghai 200050, ChinaPhone: +86-21-5239-3637Fax: +86-21-5239-3639Sale of dialysis equipment in the Chinese market.

Weigao Nikkiso (Weihai) Dialysis Equipment Co., Ltd.No. 20 Xingshan Road, Chucun Weigao Industry Park, Weihai City, Shandong, ChinaPhone: +86-631-5716299Fax: +86-631-5716297Manufacture and after-sales service of dialysis equipment in the Chinese market.

Nikkiso Pumps Korea Ltd.202, 6F, Ilshin Building, 541 Dowha-Dong,Mapo-Gu, Seoul, KoreaPhone: +82-2-719-1446Fax: +82-2-719-1440Sale and after-sales service of Nikkiso canned motor pumps, and metering pumps and sale of other Nikkiso products.

Taiwan Nikkiso Co., Ltd.6F, Der-Ho SP No.75, Nanking East Road, Sec. 4, Taipei, TaiwanPhone: +886-2-2713-9906Fax: +886-2-2713-9936Engineering and design, manufacture, sale and after-sales service of boiler-water conditioning systems for the Asian region.(Medical Devices Division)6F–6, No. 179, Fusing North Road,Songshan District, Taipei, TaiwanPhone: +886-2-2718-5759Fax: +886-2-2718-5739Consultant of sale and after-sales service of dialysis equipment in Taiwan.

M. E. Nikkiso Co., Ltd.74 Suwintawong Road, Saladang,Bangnumpeo Chacheongsao 24000, ThailandPhone: +66-38-593-207Fax: +66-38-593-208Manufacture and sale of disposable products for medical equipment.

Nikkiso Medical (Thailand) Co., Ltd.663 On-nuch Road (Sukhumvit 77), Suanluang,Bangkok 10250, ThailandPhone: +66-2-311-5736Fax: +66-2-716-2895Sale and after-sales service of medical products (dialysis equipment, disposable products, etc.) in Thailand and neighboring countries.

Nikkiso Vietnam MFG Co., Ltd.Road 19, Tan Thuan Export Processing Zone,Tan Thuan Dong Ward, District 7,Ho Chi Minh City, VietnamPhone: +84-8-37701320Fax: +84-8-37701640Manufacturing of medical equipment (blood tubes, etc.) for dialysis treatments.

Nikkiso Vietnam, Inc.Plot No. C6 & C7, Thang Long Industrial Park II, Yen My District, Hung Yen Province, VietnamPhone: +84-321-397-4520Fax: +84-321-397-4521Manufacturing of aircraft parts.

LEWA GmbH/HeadquartersUlmer Str. 10, 71229 Leonberg, GermanyPhone: +49-7152-14-0Fax: +49-7152-14-1303

LEWA Pumpen GmbHDiefenbachgasse 35/3/9, 1150 Vienna, AustriaPhone: +43-1-8773-040-0Fax: +43-1-25367221820

LEWA Bombas Ltda.Rua Georg Rexroth 609 Bloco E Conj. 2, 09951-#70 Diadema/SP, BrazilPhone: +55-11-4075-9999Fax: +55-11-4071-9920

LEWA (Dalian) Sales Co., Ltd.No. 86 Liaohedong Road DD Port, 11 6600 Dalian, ChinaPhone: +86-411-8758-1477Fax: +86-411-8758-1478

LEWA Pumpen GmbH org. sl.Sedlákova 19, 602 00 Brno, Czech RepublicPhone: +420-5-432360-52Fax: +420-5-432360-53

LEWA S.A.S.Z.A. des Sureaux 5-9 Rue d’Estienne d’Orves, 78500 Sartrouville, FrancePhone: +33-1-308674-80Fax: +33-1-308674-97

LEWA S.R.L.Via Vincenzo Monti 52, 20017 Mazzo di Rho (Mi), ItalyPhone: +39-02-93468-61Fax: +39-02-93468-62

LEWA OOO Warschawskoje schosse 1Business Center “W-plaza” offi ce,117105 Moscow, RussiaPhone: +7-495-269-01-27Fax: +7-269-01-48

LEWA ASAuglendsdalen 79,4017 Stavanger, NorwayPhone: +47-529091-00Fax: +47-529091-01

LEWA Sp. z o.o.Ul. Palisadowa 20/22, 01-940 Warsaw, PolandPhone: +48-22-6358-204Fax: +48-22-6358-988

LEWA PTE LTDBlk 1 Clementi Loop, Clementi West Logispark #02-06, 129808 SingaporePhone: +65-686-17127Fax: +65-686-16506

LEWA Hispania, S.L.Consejo de Ciento 295, 4-1/2, 08007 Barcelona, SpainPhone: +34-93-22477-40Fax: +34-93-22477-41

LEWA Pumpen AGNenzlingerweg 5, 4153 Reinach 1, SwitzerlandPhone: +41-61-7179-4-00Fax: +41-61-7179-4-01

LEWA-Nikkiso America, Inc.132 Hopping Brook Road, Holliston, MA 01746, USAPhone: +1-508-429-7403Fax: +1-508-429-8615

Integrated Process Technologies, Inc.8 Charlestown Street, Devens, MA 01434, USAPhone: +1-978-487-1100Fax: +1-978-487-1121

LEWA Middle East FZEP.O. Box 261900 Jebel Ali Free Zone,RA8VC04 Dubai, U.A.E.Phone: +971-4-8870999Fax: +971-4-8870998NIKKISO GROUP

LEWA GROUP

NIKKISO GROUP

Global Network As of July 1, 2014 LEWA GROUP


Documents

Consolidated Financial Highlights · reciprocating pump manufacturer in Germany, as well as alliances in the hemodialysis business with the Weigao Group, a medical consumable manufacturer